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Bureau of Mines Information Circular/1981 




Operation of the International 
Tin Agreement 

By Thomas J. Witzig 




UNITED STATES DEPARTMENT OF THE INTERIOR 



^^i-^2^.^,^^2^, /Oi^(AM^^ ^^y^^^<^^. 



Information Circular 8860 



Operation of the International 
Tin Agreement 

By Thomas J. Witzig 




UNITED STATES DEPARTMENT OF THE INTERIOR 
James G. Watt, Secretary 

BUREAU OF MINES 




As the Nation's principal conservation agency, the Department of the Interior 
has responsibility fcr most of our nationally owned public lands and natural 
resources. This includes fostering the wisest use of our land and water re- 
sources, protecting our fish and wildlife, preserving the environmental and 
cultural values of our national parks and historical places, and providing for 
the enjoyment of life through outdoor recreation. The Department assesses 
our energy and mineral resources and works to assure that their development is 
in the best interests of all our people. The Department also has a major re- 
sponsibility for American Indian reservation communities and for people who 
live in Island Territories under U.S. administration. 






R9S 






This publication has been cataloged as follows: 



Witzig, Thomas J. 

Operation of the International Tin Agreement. 

(Information circular / United States^ Bureau of Mines ; 8860) 

Bibliography: p. 20 

Supt. of Docs, no.: I 28.27:8860. 

1. Tin industry. 2. Conunercial treaties. I. Title. II. Series: Informa* 
tion circular (United States. Bureau of Mines) ; 8860. 



TN295.U4 [HD9539.T5] 622s [338.2'7453] 81-607844 AACR2 



For sale by the Superintendent of Documents, U.S. Government Printing Office 
Washington, D.C. 20402 



CONTENTS 



Page 

Abstract 1 

Introduction 2 

Purpose of International Commodity Agreements . 2 
History of international cooperation in the 

tin market 2 

Early agreements, 1921-46 4 

The International Tin Council 4 

Principles and objectives of the tin agreements . . 5 

Mechanics of the tin agreement 6 

Membership and voting 6 

The buffer stock 6 

Buffer stock financing 7 



Page 

Export quotas 7 

United States activities as a nonmember 8 

The U.S.S.R. and the tin market 10 

Production, consumption, and use of tin 11 

The Fifth International Tin Agreement 12 

Operations of the agreement 12 

Status of the agreement 15 

The Sixth International Tin Agreement 17 

Summary and discussion 18 

References 20 

Appendix 21 



ILLUSTRATIONS 



Page 

1. World production and consumption of tin, 1910-78 2 

2. High, low, and average prices of Straits tin, prompt delivery, New York, 1910-79 3 

3. Surplus or deficit of production, as a percentage of consumption, 1910-78 3 

4. Average Penang monthly price of tin, and ITC price ranges, export control periods, and buffer stock 

holdings, 1972-79 13 

5. Average LME cash price of tin, and ITC price ranges, export control periods, and buffer stock 

holdings, 1956-72 14 



TABLES 



1. Membership, percentages, and votes in the Fifth International Tin Agreement 6 

2. Tin stockpile objectives, 1944-80 8 

3. Tin stockpile acquisitions, 1949-60 8 

4. U.S.S.R. trade in tin, 1955-72 9 

5. Disposal of tin from the U.S. strategic stockpile 9 

6 World tin mine and smelter capacity, mine production, primary consumption, and tin reserves 11 

7. Compound rates of growth of mine production for major metals 12 

8. Principal uses of primary tin. United States and world, 1975 12 

A-1. World production and consumption of tin, and surpluses and deficits, 1910-78 21 

A-2. Yearly extreme and average prices of Straits tin, prompt delivery, New York, and yearly surpluses 

and deficits of tin, as a percentage of consumption, 1910-79 22 

A-3. Export control periods under the agreements 2? 

A-4. Price ranges in the tin agreements 2^ 

A-5. Buffer stock operations during agreements 2^ 

A-6. Tin prices, 1956-79 24 

A-7. Tin prices and taxes in Malaysia, Thailand, and Bolivia, 1957-79 24 



OPERATION OF THE INTERNATIONAL TIN AGREEMENT 

by 
Thomas J. Witzig^ 



ABSTRACT 



This Bureau of Mines report is a background study of tiie international Tin Agree- 
ment. Attempts at stabilizing the tin market prior to the agreement are detailed, 
as well as the conditions and negotiations that set up the agreement. Details of the 
five consecutive 5-year agreements beginning in 1956 are presented, with emphasis 
on membership and the agreements' primary tools: the buffer stock and export con- 
trols. Attention is focused throughout on the United States activities during the 
period, especially with regard to its strategic stockpile, and its involvement with 
the agreement culminating in its membership, for the first time, in the fifth agree- 
ment beginning in 1976. Considerations leading to the U.S. decision to join are 
detailed, and U.S. activities in the negotiations for the sixth agreement are pre- 
sented. The status and outlook for the agreement are discussed, and evaluations 
of the effectiveness of the agreement and its components are reviewed. 



Industry economist, Branch of Economic Analysis, Bureau of Mines, Washington, D.C. 



INTRODUCTION 



The International Tin Agreement (ITA) is the oldest 
of International Commodity Agreements (ICA).^ Formed 
in 1956, the ITA was supported by a history of interna- 
tional cooperation in the tin market reaching back to 
1921. Tin is the only nonagricultural commodity to be 
represented by an ICA {18y and, as such, serves as an 
example for proposed ICA's dealing with other mineral 
commodities. 

The United States became a member of the ITA for 



the first time with the fifth 5-year ITA beginning in 1976. 
This action followed a period of formal and informal 
U.S. cooperation with the International Tin Council 
(ITC), the body that controls and operates the ITA. 
Membership marked a departure from the traditional 
U.S. minerals policy of noninterference in minerals 
markets (5). This paper presents the background of 
the ITA and U.S. involvement and focuses on the ac- 
tivities of and outlook for the agreement. 



PURPOSE OF INTERNATIONAL COMMODITY AGREEMENTS 



The economic purpose of an ICA is essentially the 
stabilization of price at a level consistent with a rea- 
sonable return to producers and an assurance of sup- 
ply to consumers at a fair price (24). Secondary goals 
deriving from this are preventing excessive export 
earnings fluctuations, increasing export earnings, es- 
pecially for less-developed countries (LDC), increasing 
investment and exploration, and promoting long-term 
equilibrium between production and consumption {23). 
In the case of tin, the lastest agreement (the Fifth ITA) 
also states several related goals. These include the 



promotion of tin consumption, increasing processing 
in the producing countries, improving technical and 
economic efficiency, insuring the fair allocation of sup- 
plies in the event of a shortage, taking measures to 
alleviate difficulties such as unemployment in produc- 
ing countries in case of an oversupply, and reviewing 
tin disposals from noncommercial stockpiles (10). As 
will be seen, this latter provision has a substantial 
bearing on the U.S. relationship with the ITC, in light 
of history and current policy. 



HISTORY OF INTERNATIONAL COOPERATION IN THE TIN MARKET 



A need for stabilization of the tin market, that is, an 
equalization of supply and demand at a stable price, 
is based on the historic volatility of the price of tin and 
of the gaps between production and consumption. As 
can be seen in figure 1, surpluses or deficits between 
production and consumption of tin have existed during 
most years since 1910. Excluding the Depression and 
World War II, the gaps have ranged from a surplus of 
36,000 long tons, or 45 percent of consumption, in 
1921, to a deficit of 34,200 long tons, or 23 percent of 
consumption, in 1959. The differences between pro- 
duction and consumption have been less than 5 per- 
cent during only one-third of the years from 1910 to 
1978. 

Supply and demand for tin are said to be relatively 
price inelastic in the short term and have been esti- 
mated to have coefficients of elasticity of 0.42 and 
between —0.1 and —0.5, respectively (4). In other 
words, the percentage changes of supply and demand 
will be less, in the short run, than the percentage 
changes in price. The converse of this is that price 
changes to a greater extent in response to changes in 
supply or demand. That is, small changes in the supply 
of or demand for tin result in relatively larger changes 
in its price. Figures 2 and 3 show that as well as having 
a marked imbalance between production and consump- 
tion, the tin market has seen periods of substantial 
short-term price volatility. These gyrations in price can 



jeopardize stable operations for marginal and high-cost 
producers, such as the lode mining operations of Bo- 
livia. 

Contributing to price instability Is the structure of 
the tin-producing industry. Tin producers are usually 
either small, individual operators or large, capital In- 




'A commodity agreement is a market agreement among produc- 
ing and consuming nations. This is as opposed to a cartel, which 
is an agreement among producers only, "to divide markets among 
themselves, fix prices, exclude would-be competitors, or otherwise 
try to increase joint monopoly p'ices." (3) 

' Italic numbers in parentheses refer to items in the list of refer- 
ences preceding the appendix. 



FIGURE 1. — World production and consumption 
of tin, 1910-78. Excludes China, the U.S.S.R., the 
German Democratic Republic, North Korea, and 
the Republic of Korea. Starting 1950, tin metal; 
previously tin-in-concentrates. Data for this figure 
are in table A-1. 



700 


HIGH 

LOW 








600 










500 


- 






1 

ll 


400 


~ 






1 


300 


- 






1 V 

1 
1 / 


200 


- 


A 




i 


100 


A 




J 




n 


1 1 1 


1 


1 1 





1910 1920 



FIGURE 2. — High, low, and average prices of 
Straits tin, prompt delivery, New York, 1910-79. 
After 1975, American Metal Market composite New 
York tin price. Data for this figure are in table A-2. 



tensive and often government-owned producers. The 
Senate Foreign Relations Committee reviewed the 
relationship of pricing and production (25). 

The economic incentive among small owners who 
do not see themselves as influencing price is to 
assume price as a given. They maximize revenue 
by maximizing output. Assuming little or no fixed 
costs among these operations, they will continue 
to produce until price falls to a level that will not 
cover wages or other daily operating expenses. 

In the large capital intensive mining operations, 
economic incentives will cause the firms to maxi- 
mize production in order to lower per unit produc- 
tion costs. This incentive to maximize production 
will continue even if the operation is losing money, 
as long as the fixed cost of operation plus some 
percentage of daily operating costs are covered 
(sic). [More properly ". . . as long as the daily 
operating costs plus some percentage of fixed 
costs of operation are covered" — Author.] 

In cases of government ownership, mining opera- 
tions might well continue in the face of heavy 
losses for reasons of domestic politics or balance 
of payment needs. In such cases the government 
subsidizes tin output. 

In both the case of the small entrepreneur and the 
large capital intensive mine, the economic incen- 
tives to the firm cause overproduction in the stag- 



1910 



1920 - 



1930 - 



1940 - 



1950 - 



1960 



1970 - 



1980 




SURPLUS OR DEFICIT, percent 

FIGURE 3. — Surplus or deficit of production, as a 
percentage of consumption, 1910-78. Data for this 
figure are in table A-1. 



nant market, driving prices down to or below cost 
levels and eventually closing mines and reducing 
output. Cyclical surges in demand, therefore, can- 
not be met causing prices to inflate rapidly. The 
market mechanism in tin does not regulate pro- 
duction very effective. 

Developing countries thus have an interest in keep- 
ing price at a level high enough to keep marginal pro- 
ducers in operation, for purposes of maintaining both 
employment and the export earnings needed for further 
development. Consuming nations benefit, it is argued, 
by the increasing, and thus assured supplies forthcom- 
ing from such operations (2). 

Several aspects of the tin market suggest the feasi- 
bility of a commodity agreement. First of these is the 
relatively small number of major tin producers in the 
world. In 1977, eight countries accounted for almost 
90 percent of world production (9). The bulk of this 
production is geographically centered in Southeast 
Asia. These producers generally do not consume tin to 
any great extent, while the major consuming nations 
do not produce tin to any great extent. Consequently, 
both producers and consumers are seen as having a 
mutual interest in some sort of cooperation. Additional 
factors are the short-term price inelasticity of supply 



and demand, making stabilization desirable, and the 
fact that most of the producing nations are LDC's and 
are dependent on tin exports for much of their eco- 
nomic well-being. This latter factor, coupled with the 
substitutability of other materials for tin in some of its 
uses, makes the possibility of a cartel-like producers' 
arrangement less likely. 



Early Agreements, 1921-46 

Formal agreements among tin producing countries 
began with the Bandoeng Pool in 1921. This agreement 
was between the tin producing Federal Malay States 
(now Malaysia) and the Netherlands East Indies (now 
Indonesia). Following the postwar price collapse of 
1920, the two governments held sizable stocks that they 
had bought in unsuccessful attempts to support prices. 
The pool was an arrangement to hold the stocks of the 
two governments and the smelter at Singapore off the 
market until prices had risen to an acceptable level. 
The quantity held for most of the period was approxi- 
mately 17,000 long tons, about 15 percent of world 
production in 1921. Although prices did not rise until 
well after the stocks were on hand, Fox credits the 
pool, as well as rising consumption, with a significant 
increase in prices (7). Sales from the pool, beginning 
in 1923, are similarly credited with restraining in- 
creases in price and reducing fluctuations between the 
highest and lowest prices. The pool was depleted by 
1925 and "in the eyes of its proponents, the pool had 
proved conclusively that a degree of control over 
stocks meant a degree of control over price" (7). The 
sale of the stocks marked the end of the Bandoeng 
Pool. 

The 1920's saw a sustained boom in tin production, 
consumption, and price. Consumption and production 
were roughly matched until 1927, when substantial 
excesses in production began to become apparent, 
along with an initially gradual decline in prices. This 
decline continued until 1929, when the drop became 
precipitous with the Great Crash and the collapse of 
consumption, particularly in the United States. Earlier 
in June 1929, a group of companies representing some 
20 percent of world production, formed the Tin Pro- 
ducers Association. The purpose of the association 
was to stockpile the excess supplies of tin arriving at 
the companies' smelters in order to maintain prices 
within a certain range. However, membership in the 
association was not large enough to counteract the 
surplus of tin on the market. A high degree of depend- 
ence on the recovery of U.S. consumption and the con- 
tinued high production of nonmembers caused the as- 
sociation, even with the addition of the Netherlands 
East Indies and the major Bolivian producers, to be 
largely ineffectual. Voluntary restrictions on production 
also proved to be useless. 

This realization, and the drastically reduced reve- 
nues from the tin trade, led the governments of the 
major tin producing nations to form the International 
Tin Control Scheme, sometimes referred to as the first 
international tin agreement, in 1931. Essentially an 
outgrowth of the Tin Producers Association, the objec- 
tive of the agreement was to achieve an equilibrium 
between production and consumption through govern- 



ment-enforced export quotas. The participants formed 
the International Tin Committee to oversee the agree- 
ment. The first agreement did not provide for any buffer 
stock but could only affect the market during times of 
overproduction through the export quotas. The second 
and subsequent agreements extended controls to in- 
clude producers' stocks. The second agreement, in 
1934, also provided for "the absorption of surplus 
stocks" by a small buffer stock (7). The buffer stock 
replaced a privately held "international tin pool," 
which operated from 1931 to 1934. This pool held and 
released approximately 21,000 tons of tin and, accord- 
ing to Fox, had a real effect on stabilizing prices (7). 
However, the buffer stock was much smaller than the 
pool, and by the end of 1935 it had been exhausted 
with little effect on the market (24). 

During the third agreement (1937-41), representa- 
tives of the two major tin-consuming nations (the 
United States and United Kingdom) served as nonvot- 
ing advisors to the committee. Through these repre- 
sentatives, the United States expressed its dissatisfac- 
tion with the price levels the committee had set and 
indicated that high prices could push consumers into 
reducing the use of tin or increasing the use of substi- 
tutes (7). The U.S. view was that a firm estimate of 
production costs was necessary to insure the estab- 
lishment of reasonable price ranges. During the life of 
the agreements no such studies were made with this 
end in mind. 

In 1938, a new buffer stock was created in response 
to declining prices. The stock bought and sold tin until 
the beginning of World War II, at which time it was 
quickly liquidated. During the war, the agreement's 
control measures ceased to have effect, and although 
the agreement remained in existence, the Allies Com- 
bined War Materials Board handled the allocation of 
tin, primarily to the end of building up U.S. supplies. 
The Board, after the war, set up the Combined Tin 
Committee, which performed the same function, albeit 
on a much more widespread scale, until its dissolution 
in 1949. 

The International Tin Council 

The present-day International Tin Council (ITC) has 
its roots in the International Tin Study Group of 1948- 
56. Independent of previous tin control agreements, the 
study group was set up along the lines of the interna- 
tional Havana Conference of 1947, encouraging a wide- 
spread membership. The Havana Charter, drafted at 
the conference but never ratified by the major nations," 
laid down principles of international trade that have 
been viewed by the world community as authoritative 
(24). Chapter VI of the charter, dealing with intergov- 
ernmental commodity agreements, set the guidelines 
for and enunciated the objectives, principles, and cir- 
cumstances of commodity agreements. The chapter 
states the conditions that must exist before a com- 
modity agreement can be entered into. These condi- 
tions are development of a surplus of a primary com- 
modity that would cause serious hardship to producers 
or development of widespread unemployment or un- 
deremployment in connection with a primary commod- 



'' Chapter VI of the charter was adopted by the Economic and 
Social Council of the United Nations in 1965. 



ity arising from difficulties relating to the commodity 
that, in the absence of specific governmental action, 
would not be corrected by normal market forces in 
time to prevent undue hardship to producers or work- 
ers (24). Additional principles governing commodity 
control agreements include designing the agreements 
so as to assure the availability of supplies adequate at 
all times for world demand at reasonably stable prices, 
allowing votes for consuming nations equal to those 
for producing nations, making provisions to afford the 
satisfying of demand from the most economic sources, 
and the adoption of programs by the participating 
countries to make internal economic adjustments for 



the purpose of correcting the commodity problem in- 
volved (24). 

The Tin Study Group produced four drafts of a tin 
agreement, each an evolution of the previous. The final 
one was to be adopted as the document that would 
become the First International Tin Agreement. The 
agreement was approved by the United Nations Tin 
Conference in Geneva at the end of 1953, was ratified 
by the participating governments, and took effect on 
July 1, 1956. While conferences and discussions had 
been held under the auspices of the United Nations, 
the final agreement was, and is, independent of it. 



PRINCIPLES AND OBJECTIVES OF THE TIN AGREEMENTS 



The First International Tin Agreement ran from July 
1, 1956, to June 30, 1961. It reaffirmed the basics of 
Chapter VI of the Havana Charter, stating that "a bur- 
densome surplus of tin is expected to develop and is 
likely to be aggravated by a sharp reduction in pur- 
chases of tin for noncommercial stocks" (13). This 
statement was included after the United States an- 
nounced that it would be halting the purchase of tin 
for its strategic stockpile (7). The stated objectives of 
the agreement were to prevent or alleviate the prob- 
lems of widespread unemployment and excessive price 
fluctuations, to provide for adequate supply of tin at 
reasonable prices, and to promote the more economic 
production of tin at reasonable prices, as stated ear- 
lier. The agreement also put in place the control ma- 
chinery, under the auspices of the International Tin 
Council. The Council is responsible for the buffer stock 
and export quotas, and arranges for the quarterly meet- 
ings of the representatives of the member nations. 
Operations of the Council are discussed in a later 
section. 

The second agreement (July 1961 to June 1966) 
changed its thrust with respect to noncommercial 
stockpiles (that is, the U.S. stockpile) by expressing 
concern for the possible harmful effects of a liquida- 
tion of such stockpiles. A desire for consultation and 
advance notice in the event of a liquidation was stated.^ 
The objectives of the agreement included a more de- 
tailed definition of "reasonable prices," substituting for 



that term the phrase "prices which are fair to con- 
sumers and provide a reasonable return to producers" 
(14). 

The third agreement (July 1966 to June 1971) spe- 
cifically cited commodity agreements as being helpful 
to secure short-term stabilization of prices, long-term 
development of primary commodity markets, and as- 
sisting economic growth, particularly in developing 
producing countries. Also, "the importance to tin pro- 
ducing countries of maintaining and expanding their 
import purchasing power" was stated as a matter of 
policy for the first time (75). 

The fourth agreement (July 1971 to June 1976) added 
as a principle the "desirability of achieving the expan- 
sion of tin consumption in both developing and indus- 
trialized countries" {11). Significantly, the wording of 
the fifth agreement was changed to the "desirability of 
improving efficiency in the use of tin ... , as an aid to 
the conservation of world tin resources" {10). This 
occurred during the period when the tin market 
changed from a position of oversupply to one of under- 
supply. Both the fourth and fifth agreements specifi- 
cally stated the purpose of conforming to the principles 
of the United Nations and its Conference on Trade and 
Development. 



^ It should be noted that although the United States was not a 
member of the agreement and thus not bound by it, it in fact paid 
heed to the effects of disposals on the world tin economy, as will 
be seen later in this report. 



MECHANICS OF THE TIN AGREEMENT 



The major features of the tin agreement are the 
membership and voting, the buffer stock and its financ- 
ing, and export quotas. Details of these are discussed 
in the following. 

Membership and Voting 

Nations are members of the ITC as either producers 
or consumers of tin. Votes are apportioned to con- 
sumers on the basis of their average consumption dur- 
ing the three latest years, with the exception of the 
U.S.S.R. which votes on the basis of its imports of tin.^ 
After five votes are given each country, each country's 
percentage of total consumption is used to allocate 
votes for a total among consumers of 1,000 votes. The 
votes of the producers are allocated roughly according 
to production, also for a total of 1,000. Each producer 
also begins with five votes. Both consumer and pro- 
ducer votes are adjusted regularly to take into account 
changes in production or consumption. Member coun- 
tries and their votes are shown in table 1. As can be 
seen, the United States has the largest block of votes 
besides Malaysia. Among the producers, only Australia 
is a significant consumer of tin, and its votes are 
apportioned according to its exports. For the other 
producers, exports roughly equal production (7). As 
mentioned previously, the U.S.S.R., a major producer, 
has its votes assigned by its imports of tin, and is thus 
a consumer member. 

Bolivia almost did not join the Fifth ITA. Unique 
among the major producers, Bolivia's tin deposits are 
located in high-altitude, hard-rock formations with de- 
clining ore grades. This makes Bolivia the highest cost 
producer in the ITC, hence its demands for higher floor 
prices in the agreement as well as regular revisions of 
floor prices to conform to production costs. Bolivia has 
other problems with its tin industry that contribute to 
its higher costs. Tin production dropped after nationali- 
zation of the three major tin-producing companies in 
1952 and has only been slowly rebuilt, with the pro- 
ducers operating with antiquated machinery. There is 
great labor unrest due to the harsh working conditions 
at the mines that, combined with the political power of 
the mine unions and the fact that Bolivia counts on tin 
for almost half of its total export earnings {20, pp 149- 
159), makes tin extremely important to Bolivia's econ- 
omy and a highly volatile political issue. After almost 
a year of hesitation Bolivia did sign the agreement and 
is an important factor in ITC policymaking. 



The Buffer Stock 

The buffer stock is a method of affecting the basic 
supply-demand relationship of the tin market. By in- 
creasing supply when prices are high and demand 
when prices are low, the buffer stock manager (BSM) 
tries to maintain tin prices between the floor and ceil- 



TABLE 1. — Membership, percentages, and votes 
in the Fifth International Tin Agreement 



Votes 



69 
189 
159 
363 

27 
167 

26 



1,000 



'The U.S.S.R. does not release consumption figures, thus its re- 
quest to use imports as estimated by the ITC. This considerably 
reduces its voting power. 



Country Percentage 

PRODUCERS ' 

Australia 6.67 

Bolivia 19.04 

Indonesia 15.95 

Malaysia 37.06 

Nigeria 2.30 

Thailand 16.76 

Zaire 2.22 

Total 100.00 

CONSUMERS 2 

Austria 0.28 

Belgium-Luxembourg 1.83 

Bulgaria .52 

Canada 2.87 

Czechoslovakia 1 .90 

Denmark .23 

France 6.04 

Germany, Federal Republic of 8.24 

Hungary .91 

India 1.79 

Ireland .05 

Italy 3.67 

Japan 18.12 

Netherlands 2.15 

Norway .31 

Poland 2.79 

Romania 1 .84 

Spain 2.50 

Turkey .70 

United Kingdom 7.64 

United States 28.42 

U.S.S.R 6.23 

Yugoslavia .97 

Total 100.00 

' Percent of world production as of Oct. 1, 1979. 
' Percent of world consumption as of July 1, 1979. 
Source: International Tin Council. 



ing prices set by the ITC. The floor and ceiling prices 
are set during the quarterly meetings of the ITC and 
may be adjusted each quarter. The range between the 
floor and ceiling is divided into lower, middle, and 
upper sectors. These sectors determine if the BSM 
will buy, sell, or do nothing. If the market price of tin 
is above the ceiling, the BSM must sell tin until either 
the buffer stock is exhausted or the price falls below 
the ceiling. In the upper sector, he may sell or buy tin 
to prevent too rapid a rise in price, provided he is a 
net seller of tin. The BSM may not operate in the mar- 
ket when the price is in the middle sector without the 
express permission of the Council and, in the lower 
sector, provided he is a net buyer of tin he may buy 
or sell to prevent too steep a fall in price. If tin prices 
fail below the floor, the manager must buy tin until the 
market price is above the floor or until his funds are 
depleted. The Council, or its executive chairman if the 
Council is not in session may at any time suspend 
buffer stock operations if it believes they will not 
achieve their purpose. 
The buffer stock price ranges are expressed in ring- 



7 
21 
10 
30 
22 

7 
58 
78 
13 
21 

5 

38 

165 

24 

8 
30 
21 
27 
11 
73 
257 
60 
14 



1,000 



git ^ or Malaysian dollars (M$) per picul ° and are those 
prices found in the Penang Straits Tin IVIarket or the 
London Metal Exchange (LME), or any other market the 
Council might recognize. It should be noted that the 
manager is under no obligation to operate in the lower 
or upper sectors, but must act only when prices ac- 
tually reach the floor or ceiling. The buffer stock is the 
only tool available for defending the ceiling while ex- 
port controls may^ augment the buffer stock to defend 
the floor. 



Buffer Stock Financing 

The buffer stock is made up of mandatory contribu- 
tions of tin metal or cash equivalents from the produc- 
ing countries and similar, but voluntary contributions 
from the consuming countries. Prior to the fifth agree- 
ment contributions came only from the producers, al- 
though voluntary contributions would have been ac- 
cepted from anyone. Currently, the optimal size of the 
buffer stock is set equal to 20,000 metric tons of tin or 
their cash equivalent from the producers, and up to a 
like amount from the consumers. Cash equivalents are 
accepted based on the floor price of the agreement at 
the time the contribution is announced. This is the 
major reason that all contributions to date have been 
in cash. The Council may decide the proportion of the 
stock that will be accepted in cash. The size of each 
country's contribution is apportioned by its percentage 
as set by the Council for the allocation of votes. Physi- 
cal tin is to be received by the manager at London 
Metal Exchange warehouses and is to be of a brand 
registered with and recognized by the LME. In addition 
to these contributions, the Council may borrow for the 
purpose of the buffer stock or to supplement its re- 
sources. 

Upon termination of the agreement buffer stock op- 
erations cease, and the buffer stock and its fund, with 
any tin metal valued at an appropriate market price, 
are liquidated. The total of the two is divided among 
contributing nations. Any surplus above the actual con- 
tributions is apportioned according to the size of indi- 
vidual contributions and the time they were held by the 
buffer stock. Contributions are repaid in the same pro- 
portion of tin or cash for each country, with each hav- 
ing the option of having its tin sold and being repaid 
entirely in cash. Prior to liquidation the manager allo- 
cates enough funds, either from the buffer stock ac- 
count or through the sale of tin, to meet all expenses 
of liquidation. Any residual funds are then repaid to 
the contributing countries. 

Of the consumer members of the ITC, so far the 
Netherlands, France, the United Kingdom, Denmark, 
Belgium, Japan, Norway, and Canada have made cash 
contributions. Although at the commencement of the 
agreement the United States had stated that it would 
not contribute to the buffer stock, it did state that its 
position would be reconsidered. Since then, several 
bills were put before Congress for disposal of tin from 
the strategic stockpile and in December 1979 the Sen- 



' Prices were expressed in £ sterling until the pound was floated 
in 1972 at which time the price was switched to ringgit (Malaysian 
dollars (M$)). 

^A picul Is ISSVa pounds. 



ate sent to the White House a disposal bill (H.R. 595) 
{26) that included a donation of up to 5,000 long tons 
of tin to the buffer stock. The President signed the bill 
December 29, 1979. The proposed contribution to the 
buffer stock broached two areas of disagreement. First, 
the United States proposed that the donated tin be 
valued at its market price, rather than at the floor price 
at the time of its donation. The producers argued that 
when the tin was sold from the buffer stock, prices 
would be depressed, and if the tin were to be valued 
to the U.S. account at the higher market price at the 
time of the donation, the stock would be forced to take 
a loss, to be made up by other contributions upon 
liquidation. A compromise was reached in October 
1980 valuing the tin at the price it actually sells for. 
Since this contribution is the first to be made in tin 
metal in the history of the ITC, the precedent on valua- 
tion is important. Secondly, the producers were con- 
cerned that any contribution of metal to the buffer 
stock, which under the ITC rules would immediately be 
sold since market prices were above the ceiling, would 
depress the market. This also gives the producers 
more reason to attempt to raise ceiling prices. These 
producers would prefer a contribution in cash. Nego- 
tiations between the ITC and the United States were 
underway in late 1980 to make arrangements for the 
donation of an initial increment of 1,500 metric tons. 



Export Quotas 

The ITC's other price control tool, export controls, 
is designed to restrict the supply of tin to prevent or 
reverse a fall in price. Basically, the Council is em- 
powered to hold down exports from the producer mem- 
bers of the agreement when it has determined that 
buffer stock operations would not be sufficient to main- 
tain prices above the floor. To this end. Council rules 
state that export control may not be instituted when 
the amount of tin held by the buffer stock will likely 
be less than 5,000 metric tons at the beginning of the 
control period, and it may not be continued if the 
amount is likely to be less than 10,000 metric tons at 
the beginning of the next control period. Control pe- 
riods are a calender quarter in duration. The Council 
may, with a two-thirds vote of both consuming and 
producing countries, revise the quantities that the buf- 
fer stock must hold. 

The quantity of tin each producing country is al- 
lowed to export during a control period is determined 
in proportion to its production or export figures for the 
last four consecutive quarters before the proposed 
control period during which no control period was in 
effect. Allowances are made if that amount falls below 
some minimum, and allowed exports are reduced if the 
country is unable to export the allowed amount. This 
latter provision is intended to allow the Council to 
control actual exports more precisely by allowing one 
country to make up for shortfalls in exports by another 
country. The exporting countries are responsible for 
controlling their own exports and while the Council 
has no police powers, in the event a country exports 
more than it is authorized, the Council's powers allow 
it to reduce that country's export quota for the next 
control period, require a buffer stock donation not to 



8 



exceed the amount by which the exports exceeded the 
quota, or reduce its rights to participate in the liqui- 
dation of the stocl<pi!e. 

An important part of the export control provisions is 
the restriction of tin stocks during control periods. 
Each producing country agrees to maintain its tin 
stocks below levels negotiated by the Council, which 
may revise the allowed levels with the particular coun- 
try's acquiescence. 



The stocks allowed are in the same proportions as 
the export quotas and may be revised from time to 
time. The purpose of controlling producer stock is to 
avoid the nullification of the effects of export controls, 
which would be highly possible once controls are 
lifted. The effect is to actually reduce the production of 
tin during the control period, thus avoiding a glut after- 
wards. 



UNITED STATES ACTIVITIES AS A NONMEMBER 



Since the inception of the International Tin Agree- 
ment, the United States has been a major factor influ- 
encing both the Council and the world tin market. The 
areas of greatest consequence are the size of the U.S. 
market for tin and the Nation's strategic stockpile. As 
was seen earlier, the collapse of U.S. consumption of 
tin was a major cause of the decline in price in 1929, 
which had inspired the creation of the Tin Producers 
Association. Also, the U.S. representatives to the 
agreement of 1937-41 had served as advisors and pro- 
ponents of U.S. views. However, the onset of World 
War II marked the beginning of major U.S. Government 
involvement in the tin market. During the war, this 
involvement was through the Combined War Materials 
Board, which, together with the United Kingdom, allo- 
cated available supplies of raw materials. The United 
States had a strong desire to build a substantial stock- 
pile of strategic materials that would assure adequate 
functioning of the Nation's essential wartime activities, 
and the stockpiling activities were made permanent 
policy after the war by the Strategic and Critical Ma- 
terials Stock Piling Act of 1946 (Public Law 520, 79th 
Congress) (79). The Government was responsible for 
procuring the materials up to the limits set by the 
stockpile objectives. The objective for tin, set in 1943, 
was 210,000 long tons when large scale purchases 
began in 1949. The tin objectives, changed frequently 
over the years, are shown in table 2. They greatly ex- 
ceeded the existing stockpile at the time, and therefore 
the U.S. government was to purchase 304,821 long tons 
of tin from 1949 to 1956. 



TABLE 2. — Tin stockpile objectives, 
1944-80 {22) 

Objective, Date of 

long tons change 

210,000 11/20/44 

260,000 12/2/49 

285,000 1/26/50 

350,000 11/30/50 

245,000 6/28/51 

308,000 9/28/53 

341 ,000 2/22/55 

198,000 6/30/58 

185,000 7/7/60 

200,000 5/20/63 

232,000 3/27/69 

40,500 4/12/73 

32,499 10/1/76 

42,000 ' 5/2/80 

' American Metal Market, May 5, 1980. 



During this period the world tin industry, particularly 
in Southeast Asia, recovered from the war and pro- 
duced tin in excess of consumption requirements, the 
excess being taken by the stockpile (8). The stockpile 
acquisitions are shown in table 3. The U.S. buying 
policy was to buy at as low a price as possible, hence 
a price ceiling was set above which tin would not be 
bought. The outbreak of war in Korea caused a sub- 
stantial rise in prices as demand outraced supply, and 
very little tin was bought during 1951. During this so- 
called "buying strike" there was considerable acri- 
mony between the United States and the producing 
countries (7). When prices declined, large-scale pur- 
chases resumed until 1956, when the stockpile was 
completed. A small amount of tin was added in 1960 
through contracts, mostly with the United Kingdom, in 
which the United States bartered agricultural products 
for tin. Consequently, the tin stockpile inventory stood 
at 349,000 long tons at the end of 1960 (27). This 
amount was almost twice world consumption during 
that year and almost seven times U.S. consumption 
(27). 



TABLe 3. — Tin stocltpile acquisitions, 1949-60 



Average 
Quantity Average Number of quantity 
Year delivered, price per purchase per 

long tons ' pound, contracts contract, 
cents ' let long tons ' 

1949 51,292 102 4 12,823 

1950 39,766 99 18 3,425 

1951 19,659 126 4 398 

1952 36,239 121 2 48,107 

1953 45,008 121 NAp 

1954 18,782 121 NAp 

1955 38,307 101 1 76,613 

1956 55,768 102 2 8,731 

1957 NAp NAp 

1958 NAp NAp 

1959 NAp NAp 

I960* 7,505 101 12 625 

Total or average ' .. 312,325 109 43 7,263 

NAp Not applicable. 

' Rounded to the nearest ton. Quantities delivered under a single 
contract over more than 1 year w/ere apportioned by the number of 
months in each year of the contract. 

' Rounded to the nearest cent. 

^ Quantities do not relate to the quantities delivered because 
some contracts spanned more than 1 year. 

* Barter contracts. 

^Totals and averages calculated using unrounded data and may 
not add directly. 

Source: GSA. 



Meanwhile, the stockpile objective had been low- 
ered from its high of 341,000 long tons in 1955 to 
185,000 long tons in 1960, leaving 164,000 long tons of 
tin as surplus. The end of the stockpile buildup coin- 
cided witii the beginning of a massive export of tin 
from the U.S.S.R. The exported tin was apparently only 
funneled to Western markets from China, which had a 
substantial production of tin. Coupled with the decline 
in world consumption, the result was a supply-demand 
imbalance and decline in price. It can be seen by 
studying tables 3 and A-1 that prior to 1957, stockpile 
acquisitions of 304,821 long tons had more than offset 
the surplus production from 1948 to 1956 of 274,980 
long tons. Thus, the sale of Soviet-Chinese tin came at 
an inopportune time for tin producers (see table 4). 

The ITC's buffer stock manager bought tin from the 
middle of 1957 through the middle of 1958, for a total 
of 23,725 metric tons or 23,350 long tons (table A-5). 
Export controls were imposed from December 1957 
through September 1960. Meanwhile the U.S.S.R. had 
slowed its export of tin after consultation with the ITC 
(7). The price decline that had prompted ITC action 
quickly reversed itself, and prices remained in the ITC 
middle range until the middle of 1961. When the price 
had edged upward in 1958-59, the buffer stock man- 
ager began selling tin while export controls were still 
imposed, the effect being to cancel each other. The 
period of export control probably reduced total output 
of tin in the long run, and production did not reach its 
high levels of the mid-1950's until 1967 (8). Rising con- 
sumption in the early 1960's brought rising prices and, 
since the buffer stock had been liquidated in 1961, only 
the U.S. strategic stockpile was left as an additional 



TABLE 4.— U.S.S.R. trade in tin, 1955-72 (7) 



Imports, long tons 



Year 



China 
From 



From 
others 



Total 



Exports, 
long tons 



1955 16,663 

1956 15,452 

1957 21,653 

1958 18,995 

1959 20,471 

1960 17,420 

1961 11,023 

1962 8,563 

1963 4,232 

1964 1,083 

1965 492 

1966 492 

1967 98 

1968 295 

1969 ,... 30 

1970 197 

1971 492 

1972 784 






16,663 


2,067 





15,452 


3,248 





21,653 


18,011 


99 


19,094 


21,948 


35 


20,506 


17,816 


44 


17,464 


11,318 


39 


11,062 


5,610 


1,181 


9,744 


492 


3,445 


7,677 


689 


4,330 


5,413 


11 


5,216 


5,708 


7 


4,232 


4,724 


7 


5,512 


5,610 


6 


6,693 


6,988 





6,659 


6,689 





7,967 


8,164 





3,815 


4,307 





3,425 


4,209 






TABLE 5. — Disposal of tin from the U.S. strategic 
stockpile 



Percent 

Fiscal Tin sales, °^'^°'^^. 

year long tons ' consumption 

per calendar 
year ^ 

1960 344 0.2 

1961 193 .1 

1962 3,930 2.4 

1963 5,139 3.1 

1964 21,793 12.5 

1965 30,411 17.6 

1966 16,737 9.5 

1967 11,723 6.5 

1968 3,435 1.9 

1969 2,107 1.1 

1970 2,377 1.3 

1971 2,764 1.5 

1972 976 .5 

1973 1,643 .8 

1974 39,905 19.9 

1975 1,997 1.1 

1976 2,994 1.5 

TQ1976^ 350 NA 

1977 2,353 1.3 

1978 795 .4 

NA Not available. 

' Source: GSA. Other sources report significantly different figures 
for individual years. This is probably due to differences betw/een 
fiscal and calendar years and lags between sales and deliveries. 

^ While comparison of calendar and fiscal years is not completely 
accurate, the lags involved between sales and deliveries may tend 
to mitigate this. 

^ Transition quarter, July-September. 

supply. The General Services Administration (GSA) 
began selling tin in earnest in 1962, and between then 
and 1972 it sold a total of 101,392 long tons, equal to 
approximately 5 percent of world consumption during 
that period and as much as 17.6 percent during one 
year (see table 5). The GSA sales came at an appar- 
ently favorable time for consumers, as prices declined 
from their peaks in the mid-1960's and then began a 
relatively slow climb through the early 1970's. Export 
controls were put into effect by the ITC twice during 
the period. Tin prices surged upward beginning in 
1972, and the GSA sold some 50,000 long tons from 
1974 through 1978, 80 percent of it in 1974. The sales 
may have moderated the price rise temporarily, but 
prices continued upward to their present levels. One 
study (8) argues that the stockpile disposal sent the 
wrong signals to producers, causing them to limit pro- 
duction to a greater extent than was warranted.' The 
United States did, however, consult with the ITC on 
this disposal issue, as it did on earlier stockpile issues. 

'The study also argues that the manner of acquisition and dis- 
posal of the strategic stockpile has been more in the nature of an 
economic stockpile or buffer stock as a result of the stockpile 
policy of buying low and selling high. 



10 



THE U.S.S.R. AND THE TIN MARKET 



The U.S.S.R.'s tin industry, developed only after 
World War II, is believed to be capable of producing 
approximately 33,000 metric tons of tin per year, some- 
what less than its consumption needs (27). As noted 
earlier, the U.S.S.R.'s massive exports of the late 1950's 
served as a conduit for China, where the bulk of this tin 
originated. At the time, the ITC considered restricting 
imports from nonmember nations while, at the same 
time, conducting negotiations with the Soviets. Several 
nonmember consuming countries also agreed to restrict 
imports. Notably, the United States said that the tin the 
U.S.S.R. was exporting was actually Chinese tin and 
therefore could not be imported. The ITC arrived at a 
settlement with the U.S.S.R. restricting exports to 
"nonsocialist" countries to less than 13,500 long tons 
(13,717 metric tons), and Soviet exports declined. Inter- 
estingly, exports from the U.S.S.R. fell to almost nothing 
in the early 1960's, coincident to the growing rift be- 
tween the U.S.S.R. and China. This period also marked 



the U.S.S.R. change from a net exporter to a net im- 
porter of tin. It became a consumer member of the 
Fourth International Tin Agreement with its votes based 
on its net imports of approximately 7,500 metric tons 
in 1971 (7). 

The only other countries that are now substantial 
producers of tin and have not been members of the 
agreement are China and Brazil. As was seen, China 
exported tin to the West through the U.S.S.R. in the late 
fifties and has directly exported a substantial amount 
since then (17). China is estimated to produce some 
20,000 metric tons of tin per year and has estimated 
reserves second only to Indonesia (21). It is reported as 
unlikely that China will join the Sixth ITA. 

Brazil, the other major producer not a member of the 
ITA, has been steadily expanding its industry, from ap- 
proximately 200 tons per year in 1962 to approximately 
7,000 tons in 1978 (21). Until the expansion took place, 
Brazil had no influence on the tin market. 



11 



PRODUCTION, CONSUMPTION, AND USE OF TIN 



World tin mining and smelting capacities, mine pro- 
duction, primary consumption, and reserves are shown 
in table 6. Of the major producers, only Australia, Brazil, 
China, and the U.S.S.R. consume a significant propor- 
tion of their own production, and of these, only Aus- 
tralia is a produce/ member of the ITC. If Brazil joins 
the Sixth ITA, it too will be a producer member. Other 
than the U.S.S.R., none of the major consuming mem- 
bers produces an appreciable part of its consumption. 

World production of tin has not grown at a very 
rapid rate (table 7). While the uses for tin are expanding 
and developing countries are increasing their consump- 
tion in line with their economic progress, high tin 
prices, efficiency, and substitution are mitigating some 
of the gains in growth. Probably the major efficiency 
in tin use was the introduction of electrolytic tin plating 
in the 1950's. This replaced the hot-dipping process 



and resulted in the ability to apply much thinner coat- 
ings of tin to the steel sheet. Increases in total tinplate 
tonnage since the 1940's have not therefore resulted in 
corresponding increases in the use of tin for tinplate. 
Also, the proportion of tin in solders has gradually de- 
clined. Substitution has affected tin consumption mostly 
in two areas: tinplate, and foil and collapsible tubes. 
Two-piece aluminum cans, first produced in the late 
1950's have now taken over some 60 percent of the bev- 
erage can body market and aluminum has almost the 
entire market for beverage can lids (16). Aluminum 
offers easy formability, good corrosion resistance, and 
better recyclability.'" Aluminum has also, for cost rea- 



'"Tinplated cans must be detinned to recycle the steel and the 
pop-top lid, which is made of aluminum, must be removed. 



TABLE 6. — World tin mine and smelter capacity, mine production, primary 

consumption, and tin reserves 



1977 capacity, metric tons IS^S mine 1976 primary 

Country production, consumption, 

Mine Smelter metric tons metric tons ' 

Australia 12,000 10,500 11,600 3,646 

Austria NA NA NA 517 

Belgium-Luxembourg NA NA NA 2,956 

Bolivia 31,000 15,000 30,000 90 

Brazil 2 6,500 16,800 7,000 4,520 

Bulgaria NA NA NA 850 

Burma == NA NA 800 NA 

Canada 400 NA ^300 4,700 

China, mainland ^ 22,000 35,000 20,000 14,000 

Czechoslovakia NA NA NA 3,500 

Denmark NA NA NA 360 

France NA NA NA 10,521 

Germany, Democratic Republic of 1,200 1,500 '1,200 2,500 

Germany, Federal Republic of NA 3,600 NA 14,581 

Hungary NA NA NA 1,327 

India NA NA NA 2,600 

Indonesia 25,000 33,000 26,000 575 

Ireland NA NA NA 80 

Italy NA NA NA 7,400 

Japan 900 3,500 '600 35,088 

Korea, Republic of NA NA NA 720 

Malaysia 65,000 130,000 60,000 281 

Mexico 2 600 2,200 '500 1,600 

Netherlands NA NA NA 3,805 

Nigeria 5,000 13,000 3,500 80 

Poland NA NA NA 5,096 

Rhodesia, Southern 800 1,200 '800 NA 

Romania NA NA NA 3,125 

Rwanda ^ 1 ,200 NA NA NA 

South Africa, Republic of ^ 3,000 1,500 '2,700 2,461 

Spain 800 15,800 400 4,600 

Switzerland NA NA NA 704 

Thailand 24,000 25,000 26,000 164 

United Kingdom 5,000 20,000 3,000 13,109 

United States 300 7,300 NA *51,767 

U.S.S.R 31,000 39,000 33,000 '21,000 

Yugoslavia NA NA NA 1,200 

Zaire 5,000 4,000 3,000 120 

Other 4,300 11,100 =4,600 10,716 

Total 245,000 389,000 235,000 230,359 

NA Not available 

• Estimated. 

' Reference 17, except as noted. 
^ Not members of Fifth ITA. 
' 1977 data. 

* Reference 21. 

'Other is the difference between the total and the sum of the individual countries, Including those using 1977 data. 



Reserves, 
metric tons 



330,000 

NA 

NA 

980,000 

400,000 

NA 

500,000 

20,000 

1,500,000 

NA 

NA 

NA 

NA 

NA 

NA 

NA 

1,550,000 

NA 

NA 

NA 

NA 

830,000 

5,000 

NA 

280,000 

NA 

NA 

NA 

NA 

30,000 

NA 

NA 

1,200,000 

260,000 

40,000 

1,000,000 

NA 

200,000 

235,000 



10,000,000 



12 



sons, virtually replaced tin in foil and collapsible tubes. 
The principal uses for primary tin are shown in table 8. 
The major uses for secondary tin in the United States 
are for bronze and brass, solder, and chemicals {17). 



TABLE 7. — Compound rates of growth of mine 
production for major metals, percent per year 



Major 1914- 1950- 

metal 38 60 

Lead M.2 '2.8 

Zinc '2.8 '3.0 

Copper '3.3 4.3 

Aluminum 2 M2.3 11.6 

Steep '3.7 6.3 

Tin 1.2 .4 

' Fox (7). 

^ Plant production. 

' Bauxite. 



1960- 1965- 1970- 1975- 
65 70 75 78 



2.6 


4.7 


0.3 


-2.6 


5.2 


4.9 


.4 


.1 


3.5 


3.7 


3.1 


2.9 


6.0 


8.0 


4.5 


4.9 


5.8 


5.3 


1.9 


2.3 


2.2 


2.9 


-.6 


1.5 



TABLE 8. — Principal uses of primary tin, United 
States and world, 1975, percent (77) 



Use United States World 

Tinplate 43 42 

Solder 24 27 

Tinning 4 6 

Bronze and brass 6 8 

Other tin alloys: 

Babbit 4 NA 

Type metal — NA 

White metal 5 NA 

Other 2 NA 

Wrought tin: 

Mar tin 1 NA 

Tubes and foil — NA 

Pipes and tubing W NA 

Chemicals 6 4 

Powder 3 NA 

Other 2 14> 

— Less than 0.5 percent. 

W Withheld to avoid disclosing company proprietary data. 

NA Not available. 

' Includes other tin alloys, wrought tin, and powder. 



THE FIFTH INTERNATIONAL TIN AGREEMENT 



The Fifth International Tin Agreement is the current 
agreement, and was originally scheduled to run from 
July 1976 to June 30, 1981. At the January 1981 meeting 
of the ITC the delegates voted to extend the agreement 
for 1 year because of difficulties in the negotiations for 
the sixth agreement. The fifth agreement's most notable 
aspect is that the United States became a member for 
the first time. Prior to signing the agreement, the United 
States had been opposed to membership in commodity 
agreements, and thus the Fifth ITA marks a major 
departure from previous policy. The specific issues in- 
volved are discussed in a later section. 



With the entry of the United States, the agreement 
has as members all the major tin producing and con- 
suming nations, except China and Brazil. China, as 
mentioned earlier, is a major producer and consumer 
and exports some 20 to 25 percent of its tin production 
(17). Brazil did not join the fifth agreement because 
it feared damage to its infant industry if the ITC found 
it necessary to impose export controls. Representatives 
of Brazil have been active in the negotiations for the 
sixth agreement and they apparently consider their tin 
industry to be sufficiently developed for Brazil to join 
the agreement. 



OPERATIONS OF THE AGREEMENT 



ITC price ranges, buffer stock holdings, and Penang 
market prices for tin from 1972 to 1979 are shown in 
figure 4. The period includes the change from the 
pound sterling to the Malaysian ringgit in mid-1972, 
the GSA sales of the early 1970's, " and the entire fifth 
agreement to date. The fifth agreement began with 
almost no buffer stock holdings in tin. The limited hold- 
ings were quickly exhausted in early 1977 trying to de- 
fend the ceiling, leaving the entire stock in cash since 
then. Export controls were imposed for three quarters 
of 1973, part of the time when the buffer stock manager 
was selling tin. Price ranges for the Agreement have 
consistently lagged behind the price trend since 1976, 
effectively denying the buffer stock any opportunity to 
replenish its tin and so help moderate future price 
increases. Market prices during the fifth agreement 
have been below the ceiling on three occasions, and 



" Compare buffer stock sales of approximately 20,000 metric tons 
from mid-1973 to mid-1974 with GSA sales (table 5) of almost 40,000 
long tons (40,642 metric tons) during the same period. 



as of the end of 1980 had on no occasion been below 
the upper sector of the price range. 

During the four earlier agreements (see fig. 5), prices 
were above the ceiling on four separate occasions, for 
a total of 49 months, and were below the floor for 1 
month, at the time of the massive Soviet exports in 
1958. Price ranges have been raised at least twice in 
every agreement but the first, and the ranges have 
increased, approximately tripling along with a tripling 
in price, since 1973. Including the control period of 
1973, export controls were in place on three occasions 
for a total of 57 months. 

The first of these occasions is credited with success- 
fully defending the floor price in the face of excess 
supply and declining demand. However, for a large 
proportion of the time, the buffer stock was selling tin, 
in effect replacing some production. This placed the 
ITC in the position of reducing production while de- 
pleting its ability to moderate future price increases. 
Shortly after the control period, Soviet tin exports 
shrank and, as demand picked up through the early 



13 



2,400 



2,100 



1,800 



1,500 



O 1,200 

a. 



900 



600 



300 



4th AGREEMENT 



! EXPORT I 
CONTROLS 
I 1/19/73 

9/30/73 



1700 M$ 



1,500 M$ 



1,350 M$ 




AVERAGE PENAMG PRICE 
EX WORKS 
I 



5th AGREEMENT 



1200 M$ 



1.075 M$ 



1000 M$ 

950 ■M$ 



900 M$ 



FLOOR 583 M$ 
I 

I 



635 M$ 





1972 



1973 



1974 



1975 



1976 



1977 



1978 



1979 



FIGURE 4. — Average Penang monthly price of tin, and ITC price ranges, export control periods, and 
buffer stock holdings, 1972-79. Data for this figure are in tables A-3 — A-6. 



1960's, prices increased, culminating in very large 
increases in 1963-65, with prices above the ceiling from 
November 1963 until July 1966, when the ceiling was 
raised with the third agreement. Importantly, the 
United States, afer discussions with the ITC, sold large 
quantities of tin, which brought prices down from their 
peaks of 1964-65.'" In October 1966, the United States 

'^GSA sales from 1962 to 1968 were approximately 93,000 long 
tons, or §4,664 metric tons, and net buffer stock transactions 
amounted to purchases of 11,471 metric tons. 



agreed in principle with the ITC to moderate its sales if 
they appeared to be in conflict with buffer stock opera- 
tions of the ITC (7). This effectively marked U.S. agree- 
ment with the price moderating activities of the Coun- 
cil. After the stockpile disposal program ended, the 
United States sold no significant quantities of tin at the 
same time that the buffer stock was buying tin. 

The second period of export control, from September 
1968 through December 1969, occurred when slightly 
depressed prces had remained in the lower sector of 



14 



2.500 



2.000 - 



1.500 - 



1,000 



500 - 




25 



Q o 






20 - 



15 - 





1956 



1957 1958 1959 1960 1961 



1962 



1963 



1964 1965 1966 



1967 



1968 1969 



1970 1971 



1972 



FIGURE 5. — Average LME cash price of tin, and ITC price ranges, export control periods, and buffer 
stock holdings, 1956-72. Data for this figure are in tables A-3 — A-6. 



the price range for a number of months. Although the 
floor was not actually threatened and the buffer stock 
had cash equivalent to approximately 5,000 long tons 
of tin, controls were imposed (7). Shortly afterwards, 
consumption revived and prices increased, almost ex- 
ceeding the ceiling before the controls were lifted. 

The Council then adopted the policy of encouraging 
producers to increase their production. This period 
also saw buffer stock sales while export controls were 
in effect, for the purpose of preventing too large an 
increase in price. Fox (7) reports that "the episode 
reflected little credit on the stabilizing policy of the 
Council. During the 15 months of control the London 
tin price (monthly average basis) rose by £316 per ton 
or by about one-quarter, a rise higher almost than any 
movement shown since the Council came into exist- 
ence, except in 1964-65 when the Council was outside 
the field of influencing prices." 

Under circumstances similar to those before the sec- 
ond control period, controls were imposed in January 



1973 when prices entered the lower sector of the price 
range. They remained in effect until September 1973, 
when prices were about to break the ceiling. '^ Buffer 
stock sales, which had continued throughout the control 
period, resulted in the buffer stock being almost sold 
out by the time controls were lifted and subsequently, 
when prices rose dramatically through the middle of 
1974, GSA was again the only exogenous supplier of tin 
to the market. Prices declined after the cessation of the 
GSA sales, but this may have been due more to the 
recession of 1974-75. During the period covered by 
the fifth agreement (1976-81), there have been no ex- 
port control periods or purchases or sales of any 
magnitude by either the buffer stock or GSA. 

'' It should be noted that the export quotas under the controls of 
1968-69 and 1973 were fairly lenient in comparison with controls of 
1957-59 (see table A-3). The first intended a reduction of approxi- 
mately 4 percent, and the second was intended only to freeze ex- 
port levels. Also, evasion of the quotas existed to some extent (7). 
Black-market dealings in tin also presented, as they still do, signifi- 
cant additions to supply from Southeast Asia. 



15 



STATUS OF THE AGREEMENT 



The United States experience as a member of the 
fifth agreement will serve as prologue to its experience 
in the sixth. The United States has participated in the 
U.N. tin conferences since the first one in 1950 and sent 
a delegation to the conference negotiating the fifth 
agreement.'" The delegation's objective was to nego- 
tiate an agreement which the United States could join 
if a decision to join was made (5). The other members 
of the agreement greatly desired to see the United 
States become a member in order to bring the largest 
consumer of tin under the agreement's auspices. Also, 
the issue of stockpile disposals, which were of great 
concern to the ITC, would then be under the scrutiny 
of the ITC to a greater extent (12). To this end. Article 
43 of the agreement obligates a member to consult 
the ITC on its plans for stockpile disposals and re- 
quires that such disposals "shall be made with due 
regard to the protection of tin producers, processors 
and consumers against avoidable disruption of their 
usual markets" (70), and with due regard to its effects 
on the tin economies of the producing nations. The 
United States had already agreed in principle in 1966 
to do just this. 

The desire for the United States to join probably re- 
duced the producers' effectiveness in insisting on man- 
datory consumer contributions to the buffer stock. This 
issue was opposed by the United States on the grounds 
that without such a provision the agreement could be 
considered a treaty and thus subject only to ratification 
by the Senate (5). A donation would require approval 
of the entire Congress. The consumer viewpoint was 
adopted, and such contributions were made voluntary. 
On September 1, 1975, Secretary of State Henry Kis- 
singer announced (5) that the United States intended to 
sign the agreement and that, "We welcome its em- 
phasis on buffer stocks, its avoidance of direct price 
fixing, and its balanced voting system. We will retain 
our right to sell from the strategic stockpile, and we 
recognize the right of others to maintain a similar pro- 
gram." (6) The decision was a shift in U.S. policy regard- 
ing minerals and, to an extent, regarding commodities 
in general. During the 1950's the United States held the 
view that noninterference in markets resulted in the 
most efficient allocation of resources and thus was 
skeptical of commodity agreements. While it recognized 
that certain commodity markets did not operate effi- 
ciently, until the Fifth International Tin Agreement 
they were said to be only in the agricultural commod- 
ity sector. During the early 1960's and the Kennedy 
round of trade negotiations, "U.S. policy increasingly 
viewed commodity agreements as a potential means of 
transferring income from industrialized to developing 
countries, thus supplementing our foreign aid and gain- 
ing some political advantage" (5). It was at this time 
that the United States joined agricultural commodity 
agreements for wheat, coffee, and sugar. In the later 
1960's and early 1970's, policy swung back to its tradi- 
tional free market stance and was again skeptical of 
commodity agreements. The view was that commodity 



'♦Conferences were in 1950, 1953, 1960, 1965, 1970, 1975, and 
1980-81. The United States participated actively in all of them ex- 
cept the one in 1960, which it attended only as an observer. 



agreements operated "to stabilize prices above the 
long-run equilibrium of supply and demand" (5). And 
a distrust of commodity agreements' ability to accom- 
modate conflicting views grew from experience with 
previous agreements. 

The 1970's brought increased volatility in commodity 
prices, in part generated by the success of OPEC in 
imposing cartel prices on oil. Increasing energy costs 
affected the mineral-exporting LDC's to a much greater 
extent than they did the developed nations, exacerbat- 
ing their export earnings problems. These inflationary 
pressures brought a degree of solidarity to the LDC's 
and demands for a new International Economic Order 
intended to transfer wealth from the developed to the 
developing nations. Concurrently, U.S. policy was being 
reviewed in the wake of raw-materials shortages and 
the commodity price boom of 1972-74. It was seen as 
possible that extreme price volatility and commodity 
shortages would become the new order of affairs. Con- 
cern for U.S. dependence on energy and raw mate- 
rial supplies led to the Trade Act of 1974, "which per- 
mits U.S. negotiators to seek agreements assuring 
that it and other countries enjoy continued access to 
supplies of strategic resources at prices fair to both 
producers and consumers." Combined with the neces- 
sity for developed nations to compromise on other 
commodity issues in order to achieve cooperation 
among oil-consuming nations, "the stage was set for 
a State Department initiative to reevaluate U.S. com- 
modity policy" (5). 

Prior to the U.S. decision to join the tin agreement, 
debate was carried on among the concerned executive 
departments by the Economic Policy Board/National 
Security Council Interagency Task Force on Com- 
modity Policy. Participating agencies were the Depart- 
ments of State, Treasury, Commerce, and Interior, the 
GSA, the Council of International Economic Policy, 
and the Office of Management and Budget. The task 
force voted against recommending that the United 
States join the agreement. The issue was basically di- 
vided between the policies of free trade and noninter- 
ference in the mineral market, the views held by Treas- 
ury and Interior, and the State Department view that 
political advantages were to "be gained by accomodat- 
ing the desires of LDC's in establishing commodity 
agreements to stabilize prices." Treasury also thought 
that to join the Agreement would not produce any bene- 
fit and would prove costly by a reduction in U.S. flexi- 
bility in disposing of stockpiled tin to moderate prices. 
Finally, "this policy decision went all the way to the 
President, and at that time foreign policy criteria were 
paramount" (2), so the United States decided to join. 
The Senate ratified the agreement on September 16, 
1976, by a vote of 71 to 17, indicating that the agree- 
ment was relatively uncontroversial at the time. 

During the fifth agreement the United States has 
been the leading consumer opponent of increases in 
price ranges. Opposition is based in part on the view 
that high taxes in producing countries have restricted 
production and caused shortages and higher prices and 
that these high prices do not represent a long-term 
trend. Too, the view is held that the high prices and 
price ranges encourage substitution that could reduce 



16 



consumption and production in tine future. Also, the 
United States has opposed the producers' view that 
taxes should be included in the cost of production and 
that cost of production should be the exclusive base 
for determining price ranges. The United States has 
held that other factors must be open for consideration 
with regards to price range adjustment. 

Since the first Council session under the Fifth ITA, 
in July 1976, the United States has opposed, with 
varying amounts of support from other consuming na- 
tions and with varying degrees of success, every pro- 
posed increase in the price range. The first successful 
price increase proposal, in December 1976, was a com- 
promise between the proposed 10-percent increase in 
the floor and 14-percent increase in the ceiling and a 
smaller increase, 5 percent for the floor and 8 percent 
for the ceiling, which the United States would go along 
with. The compromise increase, 7.5 percent in the 
floor and 12 percent in the ceiling, was passed with 
only the United States voting against. In early 1977, 
the ITC established the Economic and Price Review 
Panel (EPRP), a group of four producers and four 
consumers that conducts semiannual studies of tin in- 
dustry conditions and reports to the Council the "ap- 
propriateness" of the current price range. The panel 
was established in response to the controversy in the 
price range discussions and because of Bolivia's 
threat not to ratify the Fifth ITA. After its first meeting 
the panel, which included the U.S. representative, 
recommended to the Council that the price range was 
not appropriate and should be raised. However, the size 
of the increase was intensely debated, the United States 
favoring a minimal increase and the producers and 
several consumers favoring and passing increases of 
12 and 13 percent, respectively, in the floor and ceiling. 
The United States abstained from the voting only in 
order to avoid voting against a U.S. inspired resolution 
calling on producers to take domestic action to in- 
crease production that had been added to the price 
range increase proposal. 

At the next meeting, in January 1978, the United 
States, with the Federal Republic of Germany, Japan, 
Canada, and Hungary, voted down a request to raise 
the floor M$200 and the ceiling M$100. A similar pro- 
posal at the April meeting was voted down by the 
United States, the Federal Republic of Germany, the 
United Kingdom, Japan, and Canada. In July 1978, after 
the EPRP had been unable to reach a consensus, the 
producers negotiated with the consumers that were 
normally aligned with the U.S. position. They came 
to a "gentlemen's agreement" to raise the floor price 
from M$1,200 to M$1,350 and the ceiling price from 
M$1,500 to M$1,700 in exchange for a producer com- 
mitment not to request any further price range in- 



creases for 1 year. The producers' original request was 
for an increase from M$1,200 to M$1,500 for the floor 
and from M$1,500 to M$1,900 for the ceiling. The 
United States had been willing to accept increases to 
M$1,250 for the floor and M$1,700 for the ceiling, argu- 
ing that there was no economic justificaiton for an in- 
crease over M$1,250 for the floor. The increases were 
approved by the Council without a vote. Bolivia opposed 
the "gentlemen's agreement" and continued to request 
that the price range be adjusted further upward. 

The July 1979 meeting of the ITC was the first upon 
expiration of the "gentlemen's agreement" and again, 
after some disharmony, a compromise increase in the 
price range was approved. The United States, the Fed- 
eral Republic of Germany, and the United Kingdom 
voted against it, as did Bolivia, which argued that the 
increase was inadequate. The increase for the floor was 
from M$1,350 to M$1,500 and for the ceiling was from 
M$1,700 to M$1,950. Attempts to arrive at another 
"gentlemen's agreement" were unsuccessful, although 
the major consumers agreed amongst themselves not 
to discuss the price range issue for another year. Pro- 
ducer attempts to increase the range at the January 
1980 ITC meeting were unsuccessful. Increases to 
M$1,950 and M$2,400 for the floor and ceiling, respec- 
tively, were voted down by consumers. However, in 
April 1980 producers and consumers agreed to an in- 
crease of 10 percent in the price ranges, from M$1,500 
to M$1,650 for the floor and from M$1,950 to M$2,145 
for the ceiling. The members also agreed informally not 
to change the ranges for 1 year. 

During the summer and fall of 1979, the proposed dis- 
posal of tin from the U.S. strategic stockpile became a 
major issue in the ITC. The U.S. position was that the 
sale of tin would have no detrimental effect on the 
market in that the market had already discounted the 
effect of the sales and that a large part of the tin 
would go to replenish inventories, which had declined 
substantially. The producing countries, expecially Bo- 
livia, believed the sales would result in a long-term de- 
cline in tin prices and disinvestment within the tin min- 
ing industry. GSA planned to sell by auction some 500 
metric tons of tin during each 2-week period, up to 
a maximum total of 10,000 metric tons per year. This 
would allow a moderation of sales if the market ap- 
peared to be affected. Bolivia charged that the United 
States was involved in economic aggression and op- 
posed any sales at all. It had been reported that some 
of the producers actually welcomed the sales, since the 
GSA would eventually run out of tin and the possibility 
of sales would no longer hang over the market. GSA 
auctions began in July 1980 and through the end of 
1980 only a small amount of tin had been sold. 



THE SIXTH INTERNATIONAL TIN AGREEMENT 



17 



Negotiations for tlie Sixth International Tin Agree- 
ment took place in Geneva, Switzerland, from April 14 
to May 14, 1980. Problems arose dividing the con- 
sumers and producers, leaving them unable to agree to 
a sixth agreement. Further talks in December 1980 a!30 
failed, and the fifth agreement v*/as extended for 1 year 
beyond its normal June 1981 closing date. 

The major issues of dispute were the existence of 
export controls and the size of the buffer stock. U.S. 
proposals on both of these issues differed sharply with 
producers' desires. The United States, in continuing 
its longstanding opposition to export controls, called 
for their elimination from a sixth agreement. The United 
States believes that the free market should operate if 
prices fall below the floor and the buffer stock has 
bought up to the limit, contending that export con- 
trols exacerbate long run price volatility, reduce invest- 
ment in the tin industry and hinder defense of the price 
ceiling. Also they tend to hurt efficient or new pro- 
ducers and freeze existing production patterns. Since 
the imposition of export controls has been the only ef- 
fective way to defend the floor price during previous 
agreements, producers strongly support them and 
would not agree to their removal. The United States be- 
lieves that a properly sized buffer stock would be suffi- 
cient to defend the floor and to this end proposed 
a stock size of 70,000 metric tons and recommended 
mandatory contributions from both consumers and 
producers. The 70,000-ton stock size was based upon 
an econometric model and would, in the U.S. view, be 
an effective stock size. Producers strongly opposed the 
proposal and instead argued for a stock size of 30,000 
metric tons, a reduction from the fifth agreement's rec- 
ommended stock size. After further negotiations the 
United States said that it would agree to export controls 
as a last resort in return for a larger buffer stock. Nego- 
tiations in March 1981 were scheduled to discuss the 
issue. 

Several other issues were not negotiated because of 
the deadlock on export controls and the buffer stock 
and will be matters of contention before a sixth agree- 
ment can be settled. The producing nations proposed 
that the matter of assigning votes in the Council be 
changed. Currently, the practice of giving each of the 
23 consuming nations at least five votes results in the 
remaining 885 votes being distributed by consumption 
percentages. The producers' proposal would give each 
member at least 15 votes, resulting in 650 votes being 
left to be distributed by percentage. Using the current 
percentages the United States would get a total of 
201 votes, Japan would get 133 votes, and the Federal 
Republic of Germany would get 69 votes. The three- 
nation total would be 403 votes, compared to the cur- 
rent 500 vote total. At the same time, since there are 
only seven producers the 15-vote proposal would 
change their relative voting power to a much lesser 
extent. The United States made a counterproposal that 
would increase the voting power of both large con- 
sumers and producers, by reducing the minimum num- 



ber of votes allowed each country to one. Since the 
consumers would have approximately three times the 
votes freed to be allocated by percentages, the United 
States would gain 22 votes, while the largest producer, 
Malaysia, would gain only 5 votes. 

Producers are arguing that the buffer stock ranges, 
as they are now, are inadequate. They are in favor of 
a new system based on a weighted average of produc- 
tion costs and a market trend. Bracketing this would 
be ceiling and floor prices set 15 percent above and 
below it. They argue that such a system would be 
continuous process, eliminating the need to regularly 
negotiate new price ranges. This would give an ad- 
vantage to the producers in the ITC, in light of their 
limited success so far in achieving their desired price 
range increases. No formula for calculating the refer- 
ence price has been proposed and consumers, who 
have in the past opposed any indexing of price ranges, 
will oppose such a system for the sixth agreement. In 
addition, the United States and other consumers have 
long felt that producer royalties and taxes should not 
be included in the cost of production when determining 
floor prices.'^ They believe that such increases in costs 
reduce profitability, investment, and efficiency in the 
industry and result in long-term reductions in produc- 
tion. They feel that the consuming nations should not 
be forced to subsidize producing nations' tax systems. 
The U.S. position on changing the price range struc- 
ture is to establish a fixed reference price with a 
stabilization band about it, with the reference price to 
be reviewed once a year. This, it is believed, will fix 
the price range more closely to the long-range trend 
and be less affected by short-term fluctuations. 

Two other proposals are being made by the pro- 
ducers that will be opposed by the consumers. First, it 
has been proposed that buffer stock donations be made 
in cash only. This would make it easier to defend the 
floor and more difficult to defend the ceiling. Secondly, 
ITC approval of government tin disposals has been 
sought. Consumers, particularly the United States, op- 
pose this for much the same reason as the producers 
oppose ITC authority over their taxation policies. 

These issues will be the most contentious during the 
renegotiation, while several differences will likely be 
settled more amicably. Among these settlements some 
of the. significant ones will probably be producer com- 
mitments to pursue policies insuring increased avail- 
ability of tin, ITC support for research into increasing 
the production and consumption of tin, that only two 
Council sessions be held each year, requirements for 
a price range review upon explicit movements in ex- 
change rates, and the percentage of consumption 
represented by countries ratifying the agreement neces- 
sary to achieve definitive entry into force. 



'^The effective tax rate in each of the three high-tax countries is 
shown in table A-7. Since taxation is considered to be an internal 
matter, there is strong opposition to any ITC authority over it. 



18 



SUMMARY AND DISCUSSION 



The positions taken by the producing and consum- 
ing nations for the negotiation of the Sixth International 
Tin Agreement highlight the differing viewpoints on the 
advantages and disadvantages of the tin agreement and 
commodity agreements in general. The concept of fair 
and stable prices, which is the primary goal of the 
agreement, is being viewed from two perspectives, that 
of the producer and that of the consumer. The pro- 
ducer view, particularly that of Bolivia, is that the price 
should be stabilized at some point above production 
costs. Producer proposals that the floor price be set 
equal to Bolivia's production costs, '^ which are high, 
are bound to conflict with the consumers' view that 
prices be stabilized about the long-term market trend, 
as well as conflicting with economic efficiency theory 
(3). The dichotomy reflects the interests and philoso- 
phies of the producers and consumers (that is, in this 
case, the LDC's and the developed countries respec- 
tively). 

The stated economic advantages of the tin agree- 
ments goals to consuming nations are basically two- 
fold: the assurance of supply and the moderation of 
rising prices. The first is most important in the short 
term, as substitution and efficiency can alleviate 
shortages in the long run. 

It can be argued that the agreement can actually 
subvert its purpose through the mechanisms of the 
buffer stock and export controls. The results of one 
model show that the operations of an inadequatly sized 
buffer stock can cause higher overall prices than if 
there were no stock. Such a buffer stock could, at the 
price ceiling, aggravate future price increases by satis- 
fying demand at a level higher than if the price had 
been allowed to rise and then, if the buffer stock is 
completely sold out, leaving a shortage of supply. 

At the floor price the use of export controls, which 
if stringently applied are identical to production quotas, 
can cause disinvestment within the industry, which 
can cause future supply shortages when demand picks 
up. They also conflict with producers' desires to main- 
tain employment and export earnings, but in the long 
run may benefit producers through future, higher prices. 
Thus, one argument is that such market control mech- 
anisms serve to destabilize price {18). 

The benefits of the agreement as perceived by the 
producers and covered at the beginning of this report, 
are both more numerous and of much greater impor- 
tance to them. Since most of the producers are LDC's 
and for many of them the tin industry is a major one, 
such benefits are a vital matter economically and 
politically. For this reason, perhaps, it is not surprising 
that the tin-producing nations have made greater and 
more numerous efforts to control the market than have 
the consuming nations. According to one view, how- 
ever, such efforts are actually attempts at accruing a 
semblance of monopoly profits at prices above the 
long term trend (3). Another view, though, is that the 
absence of backwards vertical integration within the 



industry is evidence that monopoly prices do not, pres- 
ently at least, exist (25). 

Disadvantages to producers from commodity agree- 
ments may exist primarily from possible substitution 
and efficiencies in the use of tin at artificially induced 
higher prices, as well as the already mentioned pos- 
sible disinvestment and lowered production and employ- 
ment when export quotas are enforced. Consuming 
nations, particularly the United States, also believe that 
imposing export controls results in lowered production 
being spread throughout the industry. Efficient produc- 
ers then do not reap the benefit of a larger share of the 
market, and less efficient producers stay in the market, 
causing average costs of production to be higher and 
discouraging technological advances and expansion by 
more efficient producers. For the LDC's the matter of 
inefficient production is probably secondary to the de- 
sire to maintain employment and exports. 

Maintenance of a floor price without export con- 
trols is seen as producing the benefit of production 
stability, which is of most use to that segment of the 
industry employing capital-intensive methods." One 
study, however, states that "buffer stocks will always 
be less advantageous than production cuts when the 
price elasticity of demand is less than — 1.0 at the time 
of disposal, even if stockholding costs are disregarded. 
The reasoning is that below this elasticity level at the 
time of disposal, production for stocks will not be eco- 
nomical because marginal revenue is negative, and 
additional sales from stocks will reduce profits, even 
if their production and shortage costs are zero" {17). 

One further disadvantage to the operation of a 
buffer stock is the possibility of speculative manipula- 
tion of the market. If it becomes known that the buffer 
stock holds little material and if prices are near or 
above the ceiling, a buying surge could deplete the 
stock and render it unable to defend any furtuher price 
increases. At the floor, knowledge that export controls 
can prevent further drops in price makes such specula- 
tion futile. 

The success of the five International Tin Agreements 
is debatable. On the one hand, ITC officials state that 
the agreements do work and are worthwhile pursuing, 
while on the other hand consumer representatives claim 
no real economic benefits and cite possible political 
advantages as their primary value. '° 

Looking to the history of the agreement, it can be 
seen that the floor price .has been successfully defend- 
ed on all but one occasion, and then the floor was 
broken for a very short time and in the face of ex- 
tremely unusual circumstances. Most reports credit the 
defense of the floor to the ITC, while one claims that 
the ITC was defending fairly low floors to begin with 
(18). This study shows that floor prices were more 
than 15 percent below ex-post trend prices during 14 of 
19 years covered, ave'-aging more than 18 percent be- 



"^ If the commodity agreement fulfills its purpose, this would re- 
sult in price stabilization somewhere between a floor (production 
cost) and a ceiling, hence, a price somewhat higher than costs to 
the highest cost producer. 



"The small producers, mostly gravel pump operations, have rela- 
tively low fixed overhead costs and thus enter and leave the Indus- 
try fairly easily (25). 

'» U.S. Government officials have said that membership should 
not be expected to confer economic benefits or secure access to 
tin supplies and cite political benefits such as better relations with 
LDC's as their primary advantages {23). 



19 



low the trend for all years. At the same time, price 
ceilings were less than 15 percent above the ex-post 
trend in all but 3 years, averaging 1.2 'percent above 
the trend for all years. The price bands themselves, 
then, were such that there was little pressure upon 
the price floor during most of the agreement and thus 
little was needed to defend it. At the other end of the 
price band, ceilings were frequently broken, often for 
substantial periods of time, perhaps more than if the 
price ranges had been more realistically set. It is 
also argued that the price ranges have been rather 
easily adjusted upwards, following price trends (7) 
rather than successfully restraining price increases. 
The United States has long said that the price ranges 
have been raised too frequently and too much. How- 
ever, the price ranges have been consistently below 
the long term trend, and the purpose of the agree- 
ment is to moderate fluctuations about the trend. 

Other than successful defense of the price floors or 
ceilings, effectiveness of the agreements can be de- 
bated on their success in moderating price fluctuations. 
Fox (7) and others say that they have been successful 
in this respect, and cite reduced fluctuations during the 
period in which the five agreements have been operat- 
ing as compared with previous time periods. However 
effectiveness must be judged against what would have 
happened during the same time in the absence of 
the agreement. A simulation of the period, with and 
without the ITA, concludes that the buffer stock and 
export controls have had a minor effect on the market, 
and, in fact, states that the U.S. strategic stockpile 
has had a far more influential role. Simulation results 
show that GSA activities resulted in substantial reduc- 
tions in price fluctations and a reduction of one-third 
in the instability of producers' income around its trend 
(18). As mentioned previously, another study concludes 
that the stockpile has behaved as a buffer stock. The 
common theory behind the ITA's lack of success in de- 
fending the ceiling is that the buffer stock is too small, 
and it may be increased in size in the next agreement. 

The manner in which the buffer stock is financed can 
also be important to its effectiveness. Prior to the U.S. 
contribution of tin metal, all contributions have been 
in cash. Unless prices are in the lower sector of the 
price range when tin can be bought, a cash contribu- 
tion will not affect the market. A Commerce Department 
paper states that contributions in either cash or metal 
will have an equal effect if a member sells tin to gener- 
erate a cash contribution in the upper sector and buys 
tin to generate cash in the lower sector. While true in 



the case of a metal contribution in the lower sector, 
such a cash contribution in the upper sector presumes 
the availability of tin to be sold by the contributor in 
addition to normal tin sales. Except in the cases of na- 
tions with a tin stockpile, this seems unlikely in time 
of high prices (that is, relatively high demand), par- 
ticularly for consumers. While at the lower end of the 
range a metal contribtuion would restrict supply (un- 
less it came from government stocks) and a casli con- 
tribution could be used to purchase tin, at the upper 
end such financing could be self-defeating. Since the 
only price influencing effect of the buffer stock in the 
upper sector is to increase supply, either a cash or a 
metal contribution will be effective only if additional 
tin is brought to the market. Also, such contributions 
could have an opposite effect if they increased the time 
it took for the tin to be sold. A partial solution to the 
problem of financing the stock in the upper sector is to 
limit sales from the stock in the sector, thus avoiding 
a depletion of the stock and allowing it to influence 
prices over a longer period of time. 

Many arguments in defense of the tin agreements' 
effectiveness quite often cite their intentions and lon- 
gevity rather than their achievements {1-2, 6) and 
somewhat belatedly point out the operations of the U.S. 
stockpile and the inadequate size of the buffer stock. 
The findings of one opposing study (78) seem more ap- 
propriate: 

(1) The Tin Agreement has only marginally reduced 
the instability of prices and producer income. Of 
far greater importance in this respect have been 
U.S. Government Stockpile transactions of tin 
made outside the Tin Agreement. 

(2) The ITA has endured while other agreements have 
failed, in part because it has lacked effective 
power, in the face of the United States strategic 
stockpile, to make critical price decisions which 
would otherwise have intensified producer-con- 
sumer conflict. 

(3) If the ITA had been designed from the beginning 
as an effective market stabilizer along the lines en- 
visaged for other products, there is a good chance 
it would have fallen apart. 

This study suggest that a buffer stock size adequate 
to defend the ceiling in the absence of the GSA (in the 
range of 40,000 to 70,000 metric tons during 1966-74, 
"would have required far greater financial commitments 
and considerably longer time horizons than could 
reasonably be expected from most governments" (18). 



20 



REFERENCES 



1. Allen, H. W. How the Tin Agreement Works. Inter- 
net. Tin Council, London, 1971, 22 pp. 

2. . The International Tin Agreement: Why It 

Works. Pres. at 1st Internat. Metals Commodities 
Conf., New York, Dec. 15, 1975, Reprint from Tin 
Internal., December 1975, 3 pp. 

3. Caves, R. E., and R. W. Jones. World Trade and 
Payments. Little, Brown and Co., Boston, Mass., 
1973, 574 pp 

4. Chabra, J., E. Grilli, and P. Pollack. The World Tin 
Economy: An Econometric Analysis. World Bank, 
Washington, D.C., 1978, 41 pp. 

5. Charles River Associates. The U.S. Decision to 
Join the International Tin Agreement: A Case 
Study. Report prepared for BuMines (contract 
J0188183) 1978, 88 pp.; available for inspection at 
Division of Analytic Studies, Bureau of Mines, 
Washington, D.C. 

6. De Koning, P. A. A. Commodity Agreements. 
Metals Anal, and Outlook, No. 8, August 1979, pp. 
26-28. 

7. Fox, W. A. Tin: The Working of a Commodity Agree- 
ment. Mining Journal Books Limited, London, 1974, 
418 pp. 

8. Gauntt, G. E. Market Stabilization and the Strategic 
Stockpile. M.S. Thesis, Pennr State Univ., State 
College, Pa. 1979, 92 pp. 

9. Harris, K. L Tin. BuMines MCP 16, July 1978, 17 pp. 

10. International Tin Council. The Fifth International 
Tin Agreement. London, 1975, 53 pp. 

11. . The Fourth International Tin Agreement. 

London, 1970, 54 pp. 

12. . The International Implications of United 

States Disposal of Stockpile Tin. London, 1973, 28 
pp. 

13. International Tin Agreement. London, 

1954, 80 pp. (including French and Spanish trans- 
lations). 

14. . The Second International Tin Agreement. 

London, 1960, 44 pp. 

15. . The Third International Tin Agreement. 

London, 1965, 143 pp. (including French and 
Spanish translations). 



16. Nag, A. Recycling Ease Gives Aluminum an Edge 
Over Steel in Beverage Can Market Battle. The 
Wall Street Journal, New York, Jan. 2, 1980, p. 30. 

17. Roskill Information Service, Ltd. Tin. London, 2d 
ed., 1977, 471 pp. 

18. Smith, G. W., and G. R. Schink. The International 
Tin Agreement: A Reassessment. The Royal Eco- 
nomic Soc, London, No. 86, December 1976, 
14 pp. 

19. Snyder, G. H. Stockpiling Strategic Materials. 
Chandler Pub. Co., San Francisco, Calif., 1966, 
314 pp. 

20. U.S. Bureau of Mines. Minerals Yearbook, 1978-79. 
Volume III, Area Reports: International. 1981, 93 
ch., 1250 pp. 

21. . Tin. Ch. in BuMines Mineral Commodity 

Summaries, 1979, pp. 168-169. 

22. U.S. Congress. Defense Industrial Base: New 
Stockpile Objectives. Joint Comm. on Defense Pro- 
duction, 94th Cong., 2d sees., pt. 3, Nov. 24, 1976, 
108 pp. 

23. U.S. General Accounting Office. The Fifth Interna- 
tional Tin Agreement: Issues and Possible Impli- 
cations. Report to the Congress ID-76-64, Aug. 30, 
1976, 35 pp. 

24. U. S. International Trade Commission. Interna- 
tional Commodity Agreements. A Report to the 
Subcommittee on International Trade of the Com- 
mittee on Finance. U.S. Senate, 94th Cong., 1st 
sess., November 1975, 189 pp. 

25. U.S. Senate. Fifth International Tin Agreement. 
Committee on Foreign Relations, Exec. Rept. No. 
94-37, 94th Cong., 2d sess., Sept. 8, 1976, 18 pp. 

26. . H.R. 595. 96th Cong., 1st sess., Apr. 4, 

1979, 3 pp. 

27. . Inquiry Into the Strategic and Critical Mate- 
rial Stockpiles of the United States. Hearings Be- 
fore the National Stockpile and Naval Petroleum 
Reserves Subcommittee. Committee on Armed 
Services. 87th Cong., 2d sess., pt. 5, July 18-19, 23, 
31, Aug. 1,3, 1962, 321 pp. 



21 



APPENDIX 
TABLE A-1. — World production and consumption of tin, and surpluses and deficits, 1910-78' 











Surplus or 










Surplus or 








Surplus 


deficit 








Surplus 


deficit 




Produc- 


Consump- 


or 


as a 




Produc- 


Consump- 


or 


as a 


Year 


tion, long 


tion, long 


deficit, 


percentage 


Year 


tion, long 


tion, long 


deficit. 


percentage 




tons ^ ^ 


tons' 


long 
tons ' * 


of 
consumption 




tons 2 3 


tons ' 


long 
tons ^ * 


of 
consumption 


1910 


116,000 


118,000 


— 2,000 


— 1.7 


1945 


88.000 


96,500 


— 8,500 


-8.8 


1911 


117,000 


118,000 


— 1,000 


— .9 


1946 


89,000 


112,000 


— 23,000 


— 20.5 


1912 


125,000 


125,000 








1947 


112,500 


123,500 


— 11,000 


-8.9 


1913 


134,000 


130,000 


4,000 


3.1 


1948 


151,500 


129,000 


22,500 


17.4 


1914 


124,000 


110,000 


14,000 


12.7 


1949 


161,500 


114,000 


47,500 


41.7 


1915 


128,000 


127,000 


1,000 


.8 


1950 


174,000 


152,000 


22,000 


14.5 


1916 


126,000 


119,000 


7,000 


5.9 


1951 


168,000 


140,000 


28,000 


20.0 


1917 


130,000 


127,000 


3,000 


2.4 


1952 


162,000 


125,000 


37,000 


29.6 


1918 


124,000 


120,000 


4,000 


3.3 


1953 


174,000 


126,000 


48,000 


38.1 


1919 


122,000 


111,000 


11,000 


9.9 


1954 


176,630 


134,200 


42,400 


31.6 


1920 


123,000 


124,000 


— 1,000 


-.8 


1955 


169,800 


143,900 


25,900 


18.0 


1921 


116,000 


80,000 


36,000 


45.0 


1956 


166,900 


150,100 


16,800 


11.2 


1922 


123,000 


132,000 


— 9,000 


-6.8 


1957 


158,200 


143,000 


15,200 


10.6 


1923 


126,000 


134,000 


— 8,000 


—6.0 


1958 


121,100 


136,200 


15,100 


11.1 


1924 


142,000 


138,000 


4,000 


2.9 


1959 


114,000 


148,200 


— 34,200 


-23.1 


1925 


146.000 


150,000 


— 4,000 


— 2.7 


1960 


145,900 


162,200 


— 16,300 


-10.1 


1926 


143,000 


146,000 


— 3,000 


— 2.1 


1961 


135,700 


165,900 


— 30,200 


— 18.2 


1927 


159,000 


150,000 


9,000 


6.0 


1962 


144,200 


165,100 


— 20,900 


— 12.7 


1928 


178,000 


169,000 


9,000 


5.3 


1963 


142,000 


166,200 


— 24,200 


— 14.6 


1929 


196,000 


184,000 


12,000 


6.5 


1964 


141,000 


173,800 


— 32,800 


— 18.9 


1930 


179,000 


163,000 


16,000 


9.8 


1965 


148,200 


173,100 


— 24,900 


— 14.4 


1931 


144,000 


141,000 


3,000 


2.1 


1966 


154,700 


175,800 


— 21,100 


— 12.0 


1932 


100,000 


105,000 


— 5,000 


— 4.8 


1967 


177,200 


174,900 


2,300 


1.3 


1933 


88,000 


133,000 


— 45,000 


-33.8 


1968 


187,800 


180,300 


7,500 


4.2 


1934 


120,500 


123,000 


— 2,500 


— 2.0 


1969 


183,300 


187,300 


— 4,000 


— 2.1 


1935 


138,000 


146,000 


— 8,000 


— 5.5 


1970 


183,600 


185,600 


— 2,000 


— 1.1 


1936 


181,000 


156,000 


25,000 


16.0 












1937 


206,000 


189,000 


17,000 


9.0 


1971 


185,900 


189,400 


— 3,500 


— 1.9 


1938 


165,000 


150,000 


15,000 


10.0 


1972 


190,700 


192,000 


— 1,300 


— 7 


1939 


167,500 


154,000 


13,500 


8.8 


1973 


187,300 


214,200 


— 26,900 


— 12.6 


1940 


235,000 


151,000 


84,000 


55.6 


1974 


179,800 


200,300 


— 20,500 


— 10.2 


1941 


246,000 


173,000 


73,000 


42.4 


1975 


177,300 


174,700 


2,600 


1.5 


1942 


121,000 


113,000 


8,000 


7.1 


1976 


182,200 


195,700 


— 13,500 


—6.9 


1943 


139,000 


90,500 


48,500 


53.6 


1977 


179,500 


184,300 


— 4,800 


— 2.6 


1944 


100,000 


100,500 


— 500 


— 5 


1978 


189,900 


184,600 


5,300 


2.9 



' Excluding China, the U.S.S.R., the German Democratic Repub 
lie. North Korea, and the Republic of Korea. 
^ Starting 1950, tin metal; previously, tin-in-concentrates. 



'Starting 1970, metric tons. 

* Minus figures indicate deficits. 

Source: American Metal Market. 



22 

TABLE A-2. — Yearly extreme and average prices of Straits Tin, prompt delivery, New York, and yearly 
surpluses and deficits of tin, as a percentage of consumption, 1910-79 











Surplus or 










Surplus or 


Year 




Price, cents per 


pound ' 


deficit as a 


Year 




Price, cents per 


pound ' 


deficit as a 








. percentage of 
consumption ^ 










percentage of 
consumption * 




High 


Low 


Average 




High 


Low 


Average 


1910 


38.75 


31.75 


34.27 


— 1.7 


1945 


52.00 


52.00 


52.00 


-8.8 


1911 


48.50 


37.60 


42.68 


— .9 


1946 


70.00 


52.00 


54.58 


— 20.5 


1912 


51.05 


42.05 


46.43 





1947 


94.00 


70.00 


77.94 


—8.9 


1913 


51.00 


36.75 


44.32 


3.1 


1948 


103.00 


94.00 


99.25 


17.4 


1914 


65.00 


28.50 


35.70 


12.7 


1949 


103.00 


77.50 


99.32 


41.7 


1915 


57.00 


32.00 


38.66 


.8 


1950 


163.50 


74.125 


95.56 


14.5 


1916 


56.00 


37.50 


43.48 


5.9 


1951 


184.00 


103.00 


128.31 


20.0 


1917 


86.00 


42.50 


61.65 


2.4 


1952 


121.50 


103.00 


120.44 


29.6 


1918 


110.00 


70.00 


86.80 


3.3 


1953 


121.50 


78.25 


95.77 


38.1 


1919 


72.50 


52.75 


65.54 


9.9 


1954 


101.00 


84.25 


91.81 


31.6 


1920 


65.00 


32.50 


50.36 


— .8 


1955 


110.00 


85.75 


94.73 


18.0 


1921 


39.00 


25.50 


30.00 


45.0 


1956 


113.75 


92.875 


101.26 


11.2 


1922 


39.00 


28.75 


32.58 


-6.8 


1957 


103.00 


87.125 


96.17 


10.6 


1923 


51.50 


37.50 


42.71 


-6.0 


1958 


99.625 


86.50 


95.09 


11.1 


1924 


59.00 


40.00 


50.20 


2.9 


1959 


104.875 


98.00 


102.01 


— 23.1 


1925 


64.50 


50.00 


57.90 


— 2.7 


1960 


104.75 


99.25 


101.40 


— 10.1 


1926 


72.50 


58.50 


65.30 


— 2.1 


1961 


125.75 


100.125 


113.27 


— 18.2 


1927 


71.00 


56.125 


64.37 


6.0 


1962 


124.25 


107.375 


114.61 


— 12.7 


1928 


57.75 


45.75 


50.46 


5.3 


1963 


133.00 


108.125 


116.64 


-14.6 


1929 


50.375 


38.375 


45.19 


6.5 


1964 


217.00 


131.375 


157.72 


-18.9 


1930 


39.75 


23.75 


31.70 


9.8 


1965 


200.875 


148.50 


178.17 


— 14.4 


1931 


27.50 


20.60 


24.46 


2.1 


1966 


183.00 


153.50 


164.02 


— 21.0 


1932 


25.625 


18.35 


22.01 


— 4.8 


1967 


156.00 


151.25 


153.40 


1.3 


1933 


55.80 


21.80 


39.12 


-33.8 


1968 


167.75 


141.25 


148.11 


4.2 


1934 


56.65 


50.00 


52.16 


— 2.0 


1969 


187.50 


152.50 


164.43 


—2.1 


1935 


54.00 


45.75 


. 50.39 


— 5.5 


1970 


188.00 


160.50 


174.13 


— 1.1 


1936 


53.50 


40.50 


46.42 


16.0 


1971 


177.50 


172.00 


174.36 


— 1.9 


1837 


66.625 


41.00 


54.24 


9.0 


1972 


183.75 


170.50 


177.47 


-.7 


1938 


46.75 


35.00 


42.26 


10.0 


1973 


345.00 


177.75 


227.48 


— 12.6 


1939 


75.00 


45.00 


50.18 


8.8 


1974 


473.25 


280.00 


395.75 


-10.2 


1940 


58.00 


44.75 


49.82 


55.6 


1975 


378.25 


300.75 


339.83 


1.5 


1941 


55.00 


50.10 


52.01 


42.2 


1976 


NA 


NA 


379.82 


-6.9 


1942 


52.00 


52.00 


52.00 


7.1 


1977 


NA 


NA 


534.60 


—2.6 


1943 


52.00 


52.00 


52.00 


53.6 


1978 


NA 


NA 


629.58 


2.9 


1944 


52.00 


52.00 


52.00 


-.5 


1979 


NA 


NA 


753.9 


NA 



NA Not available. 

' After 1975, AMM Composite New York tin price. 



^ Minus figures indicate deficits. 
Source: American Metal Market. 



TABLE A-3. — Export control periods under the agreements 



Period of 
export control 

First agreement: 

12/15/57- 3/31/58 

4/ 1/58- 6/30/58 

7/ 1/58- 9/30/58 

10/ 1/58-12/31/58 

1/ 1/59- 3/31/59 

4/ 1/59- 6/30/59 

7/ 1/59- 9/30/59 

10/ 1/59-12/31/59 

1/ 1/60- 3/31/60 

4/ 1/60- 6/30/60 

7/ 1/60- 9/30/60 

' Metric tons after 1969. 
Source: International Tin Council 



Permissible 

export amount, 

long tons ' 



Period of 
export control 



Permissible 

export amount, 

long tons ' 



27,000 
23,000 
23,000 
20,000 
20,000 
23,000 
25,000 
30,000 
36,000 
37,500 
37,500 



Third agreement: 
9/19/68-12/31/68 
1/ 1/69- 3/31/69 
4/ 1/69- 6/30/69 
7/ 1/69- 9/30/69 
10/ 1/69-12/31/69 

Fourth agreement: 
1/19/73- 3/31/73 
4/ 1/73- 6/30/73 
7/ 1/73- 9/30/73 



42,950 
38,000 
38,750 
39,500 
41,500 



35,040 
42,644 
42,644 



TABLE A-4. — Price ranges in the tin agreements 



23 



Sector 

Period of Floor 

operation price Lower Middle Upper 

£ PER LONG TON 

7/ 1/56-3/22/57 640 640- 720 720- 800 800- 880 

3/22/57-1/12/62 730 730- 780 780- 830 830- 880 

1/12/62-12/ 4/63 790 790- 850 850- 910 910- 965 

12/ 4/63-11/12/64 850 850- 900 900- 950 950-1,000 

11/12/64-7/6/66 1,000 1,000-1,050 1,050-1,150 1,150-1,200 

7/6/66-11/22/67 1,100 1,100-1,200 1,200-1,300 1,300-1,400 

11/22/67-1/16/68 1,283 1,283-1,400 1,400-1,516 1,516-1,633 

1/16/68-1/2/70 1,280 1,280-1,400 1,400-1,515 1,515-1,630 

£ PER METRIC TON 

1/ 2/70-10/21/70 1,260 1,260-1,380 1,380-1,490 1,490-1,605 

10/21/70-7/4/72 1,350 1,350-1,460 1,460-1,540 "" 1,540-1,650 

M$ PER PICUL' 

7/ 4/72-9/21/73 583 583- 633 633- 668 668- 718 

9/21/73-5/30/74 635 635- 675 675- 720 720- 760 

5/30/75-1/31/75 850 850- 940 940-1,010 1,010-1,050 

1/31/75-3/12/76 900 900- 980 980-1,040 1,040-1,100 

3/12/76-5/7/76 950 950-1,000 1,000-1,050 1,050-1,100 

5/7/76-12/9/76 1,000 1,000-1,065 1,065-1,135 1,135-1,200 

12/9/76-7/15/77 1,075 1,075-1,150 1,150-1,250 1,250-1,325 

7/15/77-7/14/78 1,200 1,200-1,300 1,300-1,400 1,400-1,500 

7/14/78-7/20/79 1,350 1,350-1,450 1,450-1,600 1,600-1,700 

7/20/79-3/13/80 1,500 1,500-1,650 1,650-1,800 1,800-1,950 

3/13/80 2 1,650 1,650-1,815 1,815-1,980 1,980-2,145 

' A picul is 133-1/3 pounds. 

* Source: Metals Week, Mar. 17, 1980. Price range had not been changed prior to publication of this paper. 
NOTE.— Beginning in January 1981, ITC price ranges are to be expressed in Malaysian dollars per kilogram (M$/kilo). 
Source: International Tin Council. 



Ceiling 
price 



880 
880 
965 
1,000 
1,200 
1,400 
1,633 
1,630 



1,605 
1,650 



718 
760 
1,050 
1,100 
1,100 
1,200 
1,325 
1,500 
1,700 
1,950 
2,145 



TABLE A-5. — Buffer stock operations during the agreements, metric tons {18) 



Year and 
quarter Purchases ' 

First agreement: 

1957, II 3,978 

1957, III 406 

1957, IV 11,162 

1958, I 7,254 

1958, II 874 

1958, III 51 

1958, IV 

1959, I 

1959, II 

1959, III 

1959, IV 

1960, I 

1961, I 51 

1961, II 

Second agreement: 

1962, III 1,834 

1962, IV 1,488 

1963, I 5 

1963, II 

1963, III 

1963, IV 

Third agreement: 

1966, IV 36 

1967, I 1,498 

1967, III 1,961 

1967, IV 1,336 

1968, I 3,526 

1968, II 991 

1968, III 2,123 

1969, II 

' Net purchases. 

^ Net sales. 

^ At the end of period stated. 



Sales ' 



Holdings ■ 



Year and 
quarter Purchases ' 

Third agreement— Con. 

1969, III 

1969, IV 

1970, I 

1970, II 

1970, IV 262 

1971, I 1,460 

Fourth agreement: 

1971, III 785 

1971, IV 3,160 

1972, I 1,462 

1972, II 20 

1972, III 2,012 

1972, IV 2,348 

1973, I 

1973, II 

1973, III 

1973, IV 

1974, I 

1974, III 

1974, IV 20 

1975, I 2,751 

1975, II 8,937 

1975, III 112 

1975, IV 8,129 

1976, I 

1976, II 

Fifth agreement: 

1976, III 

1976, IV 

1977, I 

*The stock was exhausted Jan. 13, 1977. 
Source: International Tin Council. 



Sales ■ 



Holdings ■ 






3,978 





4,384 





15,546 





22,800 





23,674 





23,725 


26 


23,699 


2,342 


21 ,357 


7,143 


14,214 


2,885 


11,329 


1,118 


10,211 


20 


10,191 





10,242 


10,242 








1,834 





3,322 





3,327 


1,971 


1,356 


193 


1,163 


1,163 








36 





1,534 





3,495 





4,831 





8,357 





9,348 





11,471 


2,885 


8,586 



818 


7,768 


3,104 


4.664 


732 


3,932 


2,962 


970 





1,232 





2,692 





3,477 





6,637 





8,099 





8,119 





10,131 





12,479 


2,004 


10,475 


406 


10,069 


5,329 


4,740 


3,739 


1,001 


859 


142 


20 


122 





142 





2,893 





11,830 





11,942 





20,071 


440 


19,631 


16,809 


2,822 


924 


1,898 


1,092 


806 


806 


«0 



24 



TABLE A-6.— Tin prices/ 1956-79 (Average LME, 1956-June 1972; 
average Penang, July 1972-79) 



Year 


Jan. 


Feb. 


Mar. 


Apr. 


May 


June 


July 


Aug. 


Sept. 


Oct. 


Nov. 


Dec. 


1956 


814.2 


805.5 


805.5 


764.3 


748.2 


742.2 


749.9 


769.4 


788.9 


805.2 


852.3 


806.1 


1957 


789.2 


770,8 


770.7 


774.2 


765.4 


762.5 


753.2 


740.0 


739.7 


731.6 


730.2 


730.6 


1958 


730.7 


731.5 


731.3 


730.9 


730.8 


730.3 


731.2 


730.4 


718.1 


740.8 


757.6 


756.4 


1959 


758.7 


772.5 


779.5 


782.3 


784.2 


788.4 


792.3 


792.9 


792.7 


794.1 


795.4 


789.2 


1960 


791.4 


792.4 


787.5 


790.6 


785.1 


793.2 


812.5 


801.6 


804.9 


804.4 


800.6 


795.5 


1961 


783.6 


792.8 


814.6 


837.3 


862.2 


893.9 


913.7 


945.4 


952.9 


945.3 


964.3 


949.3 


1962 


946.6 


951.5 


962.0 


949.3 


919.5 


876.0 


862.9 


851.8 


851.3 


855.7 


873.5 


859.4 


1963 


851.8 


852.1 


856.1 


880.7 


905.3 


907.5 


901.2 


904.6 


934.0 


939.8 


974.9 


1,010.4 


1964 


1,041.4 


1,109.1 


1,073.0 


1 ,043.4 


1,054.4 


1,183.1 


1,251.5 


1,271.8 


1,425.6 


1,584.1 


1,488.3 


1,317.1 


1965 


1,254.6 


1,230.6 


1,301.0 


1,431.0 


1,529.7 


1,499.1 


1,439.4 


1 ,484.5 


1,527.1 


1 ,455.4 


1,386.4 


1.404.1 


1966 


1,424.7 


1,406.9 


1,369.0 


1,365.4 


1,338.4 


1,277.8 


1,275.5 


1 ,244.0 


1,225.8 


1,219.8 


1 ,204.4 


1,210.0 


1967 


1,198.5 


1,201.1 


1,203.8 


1,216.2 


1,218.7 


1,221.9 


1,220.2 


1,194.5 


1,185.4 


1,190.5 


1,214.9 


1,351.4 


1968 


1,323.1 


1,316.7 


1,317.5 


1,314.9 


1,305.8 


1,306.0 


1,301.7 


1 ,296.8 


1,300.0 


1,316.9 


1,405.4 


1,379.5 


1969 


1,366.7 


1,373.7 


1,372.9 


1 ,398.8 


1,420.9 


1,430.7 


1,456.1 


1,469.3 


1,468.7 


1,496.5 


1,542.2 


1,616.3 


1970 


1,601.3 


1,569.6 


1,581.4 


1,604.2 


1,557.8 


1,476.8 


1,458.0 


1,508.3 


1,518.9 


1,528.8 


1,506.9 


1,457.2 


1971 


1,444.2 


1 ,442.8 


1 ,469.3 


1 ,484.5 


1,466.5 


1,436.9 


1,439.9 


1,419.9 


1,416.4 


1 ,402.0 


1,431.1 


1,417.1 


1972 


1,411.9 


1,413.4 


1,475.2 


1,497.0 


1,466.6 


1,456.6 


622.40 


623.92 


627.48 


622.02 


609.82 


619.79 


1973 


629.46 


634.79 


636.99 


623.53 


628.98 


652.65 


690.52 


694.76 


688.35 


704.99 


788.59 


853.11 


1974 


910.79 


1,072.10 


1,165.15 


1,290.62 


1,302.80 


1,300.57 


1,129.42 


1,238.16 


1,162.02 


1,002.62 


983.20 


947.86 


1975 


989.89 


996.77 


954.35 


947.92 


932.69 


933.66 


956.04 


1,001.13 


987.38 


957.03 


956.29 


953.50 


1976 


960.24 


1,002.96 


1,064.80 


1,084.64 


1,144.70 


1,172.41 


1,263.60 


1,195.01 


1,178.24 


1,195.72 


1,221.25 


1,250.80 


1977 


1,394.64 


1,525.47 


1,557.27 


1,434.73 


1,458.73 


1 ,440.37 


1,543.32 


1 ,665.86 


1,659.78 


1,815.92 


1,804.71 


1,751.86 


1978 


1,680.48 


1,686.67 


1,573.75 


1,534.42 


1,644.32 


1,718.85 


1,709.73 


1,770.38 


1,866.17 


1,950.92 


1 ,975.38 


1,820.00 


1979 


1,792.21 


1,886.52 


1,950.92 


1,951.52 


1,967.36 


1,984.48 


1,951.50 


1,894.13 


1,946.40 


2,005.48 


2,056.72 


2,126.00 



' Pounds per long ton, January 1956-December 1969; pounds per metric ton, 
July 1972 to present. 



uiy ^\illi 10 present. 
Source: International Tin Council. 



January 1970-June 1972; and Malaysian dollars per picul 



TABLE A-7. — Tin prices and taxes in IVIalaysia, Thailand, and Bolivia, 1957-79 







Malaysia 






Thailand 






Bolivia 


















Price, 






Year 


Price, 


Amount 


Tax as 


Price, 


Amount 


Tax as 


US$ per 


Amount 


Tax as 


M$ per 


of tax 


% of 


Baht per 


of tax. 


% of 


pound 


of tax, 


% of 




picul 


M$ 


price 


picul 


Baht 


price 


(N.Y.) 


US$ 


price 


1957 


373 


56 


15 


2,479 


639 


26 


0.96 


(') 


0) 


1958 


369 


56 


15 


2,487 


641 


26 


.95 


(') 


(') 


1959 


397 


60 


15 


2,696 


694 


26 


1.02 


(') 


(') 


1960 


394 


60 


15 


2,715 


696 


26 


1.01 


(') 


(•) 


1961 


447 


71 


16 


3,028 


777 


26 


1.13 


0.18 


16 


1962 


448 


71 


16 


3,025 


776 


26 


1.14 


.19 


16 


1963 


455 


73 


16 


3,095 


793 


26 


1.16 


.19 


16 


1964 


619 


99 


16 


4,196 


1,068 ■ 


25 


1.57 


.32 


20 


1965 


703 


112 


16 


4,767 


1,211 


25 


1.78 


.21 


12 


1966 


645 


103 


16 


4,367 


842 


19 


1.64 


.16 


10 


1967 


600 


97 


16 


4,059 


765 


19 


1.53 


.12 


8 


1968 


566 


90 


16 


3,834 


708 


18 


1.48 


.11 


7 


1969 


626 


100 


16 


4,248 


812 


19 


1.64 


.16 


10 


1970 


665 


106 


16 


4,479 


870 


19 


1.74 


.20 


11 


1971 


632 


101 


16 


4,334 


833 


19 


1.67 


.17 


10 


1972 


627 


100 


16 


4,642 


911 


20 


1.77 


.21 


12 


1973 


686 


109 


16 


5,800 


1,200 


21 


2.27 


.42 


19 


1974 


1,137 


263 


23 


9,653 


2,163 


22 


3.96 


1.21 


31 


1975 


964 


185 


19 


8,235 


1,801 


22 


3.40 


.96 


28 


1976 


1,147 


267 


23 


9,205 


2,051 


22 


3.74 


1.00 


27 


1977 


1,588 


451 


28 


13,159 


3,280 


25 


5.33 


1.72 


32 


1978 


1,743 


471 


27 


15,305 


4,472 


29 


5.89 


2.00 


34 


1979 


1,959 


535 


27 


18,281 


5,484 


30 


7.54 


2.00 


36 



' Data not given in source. 

' For years in which more than one tax rate was applicablbe, tax rate in effect for the longest period was used for whole year. 

^ Amount of tax calculated by applying tax rate to yearly average prices, 

*. All numbers rounded. 

Source: U.S. Dept. of Commerce. 

o U. S. GOVERNMENT PRINTING OFFICE : 1981 356-919/9933 



8433 


















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